economic

Which stock market sector is currently interesting due to its volatility

While long-term investors in physical shares are not too interested in volatility, CFD traders can make potentially very nice profits from it. However, equity markets are vast and it can happen that an interesting title slips through one’s fingers. This article will make sure that it doesn't happen.

What is volatility and how is it created

If you were to equate the words volatility and nervousness (or moodiness) you would not be far off the mark. Indeed, volatility is really a measure of nervousness in the markets and where there is nervousness, there is also uncertainty. Uncertainty in the markets can arise for many different reasons, but it usually happens before the release of important macroeconomic news (on our economic calendar), you can identify those by the three bulls' heads symbols) or during unexpected events with a major impact on a particular market sector or the geopolitical order of the world (nat

New POTUS, New Gold Bull Market?

New POTUS, New Gold Bull Market?

Finance Press Release Finance Press Release 05.02.2021 16:34
Joe Biden’s election as president and his first economic proposal proved negative for gold prices, but the presidency might yet turn positive.The 46 th presidency of the United States has officially begun. What does that mean for the U.S. economy, politics and the precious metals market?Let’s start by noting that this will not be an easy presidency. The epidemic in the U.S. is raging, the economy is in recession , and public debt is ballooning. Foreign relations are strained while the nation is strongly polarized, as the recent riots clearly showed. So, Biden will have to face many problems, with few assets .First, as he turned 78 in November, Biden has been the oldest person ever sworn in as U.S. president. Second, his political capital is rather weak, as the 2020 election is more about Trump’s loss than Biden’s victory. In other words, many of his voters supported Biden not because of his merits but only because they opposed Trump. Third, he will have the smallest congressional majorities in several years. Democrats have only ten more seats than Republicans in the House and the same number of seats in the Senate. And even with Kamala Harris as a tie-breaker, Biden could not lose a single Democrat senator’s vote to pass any legislation in Senate.On the one hand, Biden’s tough political position seems to be negative for gold prices, as it lowers the odds of implementing the most radical, leftist political agenda. On the other hand, Biden’s difficulties also lower the chances of sound economic reforms, which is good news for the yellow metal. A divided Congress and Democratic Party with an old president at the helm, who has a weak personal base could result in political conflicts and stalemates which would prove positive for gold.When it comes to economics, Biden has already presented his pandemic aid bill, worth of $1.9 trillion. The proposal includes direct payments of $1,400 to households, $400 per week in supplementary unemployment benefits through September, billions of dollars for struggling businesses, schools, and local governments, as well as funding that would accelerate vaccination and support other coronavirus containment efforts. Biden also wants to raise the minimum wage to $15 per hour, which will not appeal to Republicans. The big size of the package will also be disliked by the GOP.The fact that Democrats have won the Georgia Senate runoffs, taking control over the Senate, increases the chances that Biden will implement his economic stimulus. The equity markets welcomed the idea of another large aid package, in contrast to bond investors who sell Treasuries, causing the yields to go up. The increase in real interest rates pushed gold prices down , as the chart below shows.It seems that investors liked the idea of big stimulus, hoping for acceleration in economic growth. However, printing more money (I know, the Treasury technically doesn’t print money – but it issues bonds which are to a large extent bought by the Fed ) and sending checks to people doesn’t increase economic output. Another problem is that the U.S. can’t run massive fiscal deficits forever and ever , hoping that interest rates will always stay low.So, although Biden’s economic stimulus may add something to the GDP growth in the short-term, it will not fundamentally strengthen the economy. Quite the contrary, the massive increase in government spending and public debt (as well as in taxation) will probably hamper the long-term productivity growth and make the already fragile debt-based economic model even more fragile. What is really worrisome is that Biden doesn’t seem to care about U.S. indebtedness – he has already spoken strongly against deficit worries and hasn’t proposed any actions to reduce the debt – and plans to unveil the additional economic stimulus.Hence, although gold declined initially in a response to Biden’s economic stimulus proposal, the new president could ultimately turn out to be positive for the yellow metal. After all, gold declined in the aftermath of the Lehman Brothers’ collapse , but it shined under Barack Obama’s first presidency. And Biden is likely to be even more fiscally irresponsible than Obama (or Trump), while the Fed under Powell is likely to even more monetarily irresponsible than under Bernanke (or Yellen ). Indeed, according to The Economist , Biden’s proposal is worth about nine percent of pre-crisis GDP, nearly twice the size of Obama’s aid package in the aftermath of the Great Recession . And, in contrast to previous crises, the Fed has announced the desire to overshoot its inflation target. All these factors should support gold prices in the long run.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Will Stocks Be Brady or Mahomes?

Will Stocks Be Brady or Mahomes?

Finance Press Release Finance Press Release 08.02.2021 15:46
One week, Reddit bandits take on hedge funds and win, pumping up stocks like GameStop and AMC while the broader market sees its worst decline since October.What a difference a week can make.The indices then see their most significant gains the next week since Joe Biden's election victory and don't see a down day all week.Now we're here- still amid a tug of war between sentiments. For now, though, things are looking rosy. That is, of course, unless you're Patrick Mahomes this morning.Can the market keep up it’s winning streak this week? It’s possible. But I’d be surprised if we don’t see at least one sharp pullback before this Friday (Feb. 12).Can the market keep up its winning streak this week? It's possible. But I'd be surprised if we don't see at least one sharp pullback this week.Despite tailwinds moving the markets right now, such as stimulus progress, an ever-improving vaccine delivery, the possibility of an effective one-dose vaccine from Johnson and Johnson (JNJ), falling COVID numbers, and an improving economic outlook based on consistently falling jobless claims and corporate earnings that continue to crush, I want you to be wary of complacency and overvaluation.Yes, I know I keep saying this. I also know that earnings are on pace to rise by over 20% in 2021. Since 1980, only 12 years have earnings increased by 15% or more. Except for 2018, the market gained an average of 12% in all of those years.But consider some valuation metrics that scream “bubble.”As of February 4, 2021, the Buffett Indicator , or the ratio of the total US stock market valuation to the GDP, was at a level not seen since the dotcom bubble. If you take the US stock market cap of $48.7 trillion and the estimated GDP of $21.7 trillion, we're nearly 224% overvalued and 84% above the historical average.With the S&P 500, Nasdaq, and Russell 2000 all currently trading at record closes, fears of a bubble are genuine. The S&P 500’s forward 12-month P/E ratio is back to above 22 and well above the 10-year average of 15.8. The Russell 2000 is also back at a historic high above its 200-day moving average. Tech stock valuations are also approaching dot-com bust levels.Yes, the outlook is healthy and for good reason. According to a recent Bank of America survey of 194 money managers, bullishness on stocks is at a three-year high, and the average share of cash in portfolios, a sign of protection from market turmoil, is at its lowest level since May 2013.But always remember that when the market gets what it expects, and we’re expecting strength by mid-year, it’s usually a time to sell rather than buy.While I don’t foresee a crash like we saw last March, I still maintain that some correction before the end of Q1 could happen.Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).A correction could also be an excellent buying opportunity for what could be a great second half of the year.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth.With that said, to sum it up:While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don't think that a decline above ~20%, leading to a bear market will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. How Frothy is Tech Again?Figure 1- Nasdaq Composite Index $COMPI remain bullish on tech. Its earnings continue to defy expectations with stocks like Amazon, Alphabet, PayPal, and eBay all crushing estimates last week. I’m also especially bullish on subsectors such as cloud computing, e-commerce, and fintech for 2021.But please monitor the RSI.The Nasdaq is opening the week at another record high and is continuing to show strength. But there are clear echoes of the dotcom bubble 20-years ago, and the index has been trading in an RSI-based pattern.Let’s break down the Nasdaq since December and how it has reacted whenever the RSI has exceeded 70.December 9- exceeded an RSI of 70 and briefly pulled back.January 4- exceeded a 70 RSI just before the new year, and declined 1.47%.January 11- declined by 1.45% after exceeding a 70 RSI.Week of January 25- Exceeded an RSI of over 73 before the week, and declined 4.13% for the week.Every single time the RSI exceeded 70, I switched my Nasdaq call to a SELL.Why?The Nasdaq is trading in a precise pattern.The RSI is at around 67.50 so I’m not ready to switch my call again. But I am a bit concerned. Tech valuations, especially the tech IPO market, terrify me. SPACs don’t help either.The ratio of market value to total revenues has also not been this high since the dotcom bust.I still like tech and am bullish for 2021. But for now, I'm going to stay conservative and say HOLD while monitoring the RSI.For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold About To Spring As Stocks Cool Off At Highs

Gold About To Spring As Stocks Cool Off At Highs

Monica Kingsley Monica Kingsley 08.02.2021 16:15
Stock bulls aren‘t yielding an inch of ground, and technically they have precious few reasons for doing so. It‘s still strong the stock market bull, and standing in its way isn‘t really advisable. With the S&P 500 at new highs, and the anticipated slowdown in gains over Friday, where is the momentary balance of forces? As the proverbial rubber bands gets pushed upwards still, what about those rising probabilities of seeing at least a short-term pause in the stellar pace of gains since last Monday? Gold did recover on Friday, and didn‘t disappoint after Thursday‘s slide. The weak non-farm employment data certainly helped, sending the dollar bulls packing. It‘s my view that we‘re on the way to making another dollar top, after which much lower greenback values would follow. Given the currently still prevailing negative correlation between the fiat currency and its shiny nemesis, that would also take the short-term pressure of the monetary metal(s). What would you expect given the $1.9T stimulus bill, infrastructure plans of similar price tag, and the 2020 debt to GDP oh so solidly over 108%? Inflation is roaring – red hot copper, base metals, corn, soybeans, lumber and oil, and Treasury holders are demanding higher yields especially on the long end (we‘re getting started here too). Apart from the key currency ingredient, I‘ll present today more than a few good reasons for the precious metals bull to come roaring back with vengeance before too long. Let‘s dive into the charts (all courtesy of www.stockcharts.com). S&P 500 Outlook and Its Internals Stocks keep pushing higher, and the bulls are strong regardless of the little contraction in the daily volume. The daily indicators attest to the strength of the uptrend, but the pace of daily increases looks set to slow down as minimum though. Imagine that all the constituent shares in the S&P 500 had equal weight (i.e. forget about $NYFANG) – this is the chart you get. RSP ETF is only now challenging its highs, which is however not a disappointment or a red light flashing divergence at all. The march to new highs in the S&P 500 still looks satisfactorily broad based. Market breadth confirms that very clearly. Both the advance-decline line and advance-decline volume aren‘t disappointing in the least, and new highs new lows have made a strong comeback from preceding setback. The intermediate picture is one of strength. Credit Markets and S&P 500 Sectoral Ratios High yield corporate bonds to short-term Treasuries (HYG:SHY) ratio with S&P 500 overlaid (black line) shows that the two are tracking each other tightly in recent days. Stocks haven‘t yet yielded in their attempt at taking leadership position, regardless of their performance since the start of November (which makes the attempt suspect in the very short-term, as stocks have lagged a little relative to the credit markets back then). Bearish prospects? No way, dips are still to be bought. The financials to utilities (XLF:XLU) ratio still broadly supports the stock market advance. Looking at the bond market dynamics, I expect utilities to remain under pressure while financials would gain faster. I‘m not worried by the current relatively depressed ratio‘s value, and don‘t consider it a warning sign for the S&P 500 in the least. Consumer discretionaries to consumer staples (XLY:XLP) is another leading ratio worth watching. It‘s currently at quite elevated levels, as I view the discretionaries as extended while the staples have undergone an appealing pullback. Even though that makes for short-term headwinds in the ratio, it‘s still primed to support the stock market bulls. Gold & Silver Friday‘s gold session still is cause enough for optimism among the gold bulls about an important low being made. The other option would be a brief dip below Thursday‘s lows, which I however due to more powerful $USD reversal on Friday (erasing all Thursday‘s gains on the heels of poor non-farm payrolls data), don‘t look at as the more likely scenario currently. For now, it still remains most probable that Thursday‘s bottom in gold won‘t be overcome by much, not going down to more than $1760 (though I am obviously not betting all in my trading plans on this strong support) – if at all. It‘s the „if at all“ part that I subscribe to most heavily. Silver‘s chart is the livelier one, less under pressure but given the recent squeeze-driven run, the white metal might need to cool down a bit here. The 1H real economy recovery outlook is though guaranteed to put a solid floor below any sub $26 dip should that – which is as questionable as in case of gold – happen at all. Base building at roughly current levels would be a healthy development for the bulls to rejoice. Precious Metals Ratios Checking out on the gold to all corporate bonds ($GOLD:$DJCB) ratio reveals relative strength in the yellow metal currently. It‘s trading much farther above its late Nov low than the metal itself. Similarly to the case junior miners to senior ones are making, this is a hidden sign of strength in the precious metals sector, whose next upleg is knocking on door. The miners to gold ($HUI:$GOLD) ratio‘s false breakdown announcing another upleg that I discussed on Feb 01 already, is still intact, and sending the very same signals of internal strength inside the precious metals complex. The 1H 2021 future is bright, and approaching fast. Summary The stock market keeps powering higher, and despite the rather clear skies ahead, a bit of short-term caution given the speed of the recovery and its internals presented, is in place. I wouldn‘t be surprised to see today or tomorrow a brief and weak whiff of lower prices – nothing to call home about if you were a bear, that is. The gold and silver bulls apprear to be staging a return, slowly but surely, which is consistent with the price damage repair pattern frequently experienced after sizable red candles that felt to at least part of the marketplace as out of the left field. The case for the next upleg remains as strong as it has ever been in my view. Thank you for having read today‘s free analysis, which is available in full here at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.
Stocks Ripe for a Breather As Gold and Silver Remain Strong

Stocks Ripe for a Breather As Gold and Silver Remain Strong

Monica Kingsley Monica Kingsley 10.02.2021 15:44
Both the upside and downside in stocks appears limited as these keep cooling off not far away from recent highs. Yesterday‘s session sent us a telling signal that the bears might wake up from their stupor briefly. Largely though, all remains well in the S&P 500 land. The anticipated gold rebound is underway, and the significant upper knot of yesterday‘s session isn‘t concerning – gold is not rolling over to the downside here. Let alone silver. I view yesterday‘s trading as consistent with a daily pause within an unfolding uptrend. My open long position is growingly profitable, and I‘ve covered the bullish case in detail both on Monday and Tuesday. Today‘s analysis will strengthen the story even more. Given the dollar performance, I can‘t underline enough the importance of what we‘re witnessing – let‘s move to my Monday‘s dollar observations, which are silently marking the turning point I called for, directly relevant to precious metals: (…) The weak non-farm employment data certainly helped, sending the dollar bulls packing. It‘s my view that we‘re on the way to making another dollar top, after which much lower greenback values would follow. Given the currently still prevailing negative correlation between the fiat currency and its shiny nemesis, that would also take the short-term pressure of the monetary metal(s). What would you expect given the $1.9T stimulus bill, infrastructure plans of similar price tag, and the 2020 debt to GDP oh so solidly over 108%? Inflation is roaring – red hot copper, base metals, corn, soybeans, lumber and oil, and Treasury holders are demanding higher yields especially on the long end (we‘re getting started here too). Apart from the key currency ingredient, I‘ll present today more than a few good reasons for the precious metals bull to come roaring back with vengeance before too long. Finally, I‘ll bring you uranimum market analysis today as well. By popular demand, I‘ll dive into the commodity and its miners. You know already that my focus goes much further than the key topic of these analyses (stocks and precious metals). I am regularly covering oil, commodities and currencies too – just check out my trading story if you hadn‘t done so already. So, let‘s dive into the charts (all courtesy of www.stockcharts.com). S&P 500 Outlook and Its Internals A first day of hesitation into a very strong chart with non-stop gains recently, yet it‘s exactly these moments when the bears might try to raise their heads once again. Just to rock the boat, that‘s all. The Force index is warning that its solid upswing is due a reprieve here in what I perceive to be initial signs of selling into strength. Not too much, but distribution had an upper hand yesterday over accumulation. Credit Markets High yield corporate bonds (HYG ETF) didn‘t perform fine yesterday at all. On declining volume, the bulls couldn‘t close above Monday‘s opening prices, which given the post Jan 20 performance doesn‘t bode well for the short term. The steep uptrend simply appears in need of a rest. Smallcaps, Emerging Markets and Oil S&P 500 vs. the overlaid Russell 2000 (black line) isn‘t sending any warning signs of internal weakness when the two are compared. The rising tide is lifting all (stock) boats. Neither the emerging markets (black line) are diverging – the many stock bull markets around the world, they are all doing fine. The oil to gold ratio keeps leaning in favor of oil, just as it‘s expected during an economic recovery, coupled with inflation that‘s lighting fire across commodities. The stock bull isn‘t going down really. Gold & Silver Let‘s overlay the gold chart with silver (black line). My yesterday‘s words are a good fit also today – the disconnect since the Nov low should be pretty obvious, and interpreted the silver bullish way I‘ve been hammering for weeks already. Please also note that the white metal has been outperforming well before any silver squeeze caught everyone‘s attention. The gold to silver ratio sends a similarly clear message – the coming precious metals upleg will be characterized by silver outperforming gold for a variety of reasons beyond the industrial demand and versatility ones. Silver‘s above ground stockpile isn‘t being added to at the same pace as gold‘s is, and its recycling is less feasible practically speaking. Solar panels are but one of the ever hungry industrial applications, making heavy demands on silver reserves. Let‘s overlay the senior gold miners chart with both junior mining stocks (also gold) and silver mining stocks. See the late Nov turning point, where silver miners started outperforming both the gold juniors and gold seniors. That‘s another proof of the precious metals bull waking up. From the Readers‘ Mailbag - Uranium Q: Hi Monica, despite all the dire warnings of $1500 on gold, you seem to be spot on so far. Where do you think uranium might be headed. It looks risky but some say nowhere but up others nowhere but down! A: Thank you very much! That‘s honest analysis, free from fearmongering. I have been very vocal in writing here, on Twitter, and within comments everywhere that hypothetical technical targets divorced from reality (nonsensical) are dangerous to those who take them without a pinch of salt or two. Whenever I turn from a precious metals (or stock market) bull to a more cautious tone, you all my dear readers, will be the first ones to know. Just as now, the technical signs supporting the bullish (PMs) case are appearing increasingly forcefully (hello, dollar), the same way I‘ll present to you the weakening bullish factors whenever their time comes. We are far away from that in both markets, and in oil too (you‘ll hear me cover that one more often as well). Uranium was hit pretty hard with the Fukushima disaster of 2011 that brought about a long bear market. In 2016, a bottom was reached, and the commodity is slowly but surely on the mend. No spectacular gains, but modest positive returns that not even coronavirus managed to bring down. The same though couldn‘t be said about uranium miners as the below chart shows. Having taken a plunge, they‘ve recovered with the veracity of Bitcoin (called right in my first 2021 analysis), outperforming uranium as a commodity greatly. Still, these remain considerably below their 2011 highs (over $105), and given the energy mix and policies, I am clearly on the bullish side of the uranium opinion spectrum. Summary The stock market keeps holding gained ground, but regardless of the rather clear skies ahead, a bit of short-term caution is called for given the weakening credit markets, which may prove to be very temporary indeed. Expect any correction to be relatively shallow – and new highs to follow, for we‘re far away from a top. The gold and silver bulls are consolidating gains amid their return, and the bullish case for precious metals is growing stronger day by day. Crucially, it‘s not about the dollar here, but about the sectoral internals, and decoupling from rising Treasury yields. The new upleg is knocking on the door, and patience will be rewarded with stellar gains. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.
That Wasn’t Much of a Down Day..

That Wasn’t Much of a Down Day..

Finance Press Release Finance Press Release 10.02.2021 15:55
Technically, the Dow and S&P snapped their 7-day winning streak.Technically.I hardly consider a decline of 0.03% and 0.11% for the Dow and S&P, respectively, a down day.Meanwhile, the Nasdaq and Russell saw a record close for who knows how many consecutive days.Can the market keep this up? Who even knows anymore. Everything seems to defy expectations and logic. Yeah, it's possible. But I'd be surprised if we don't see at least one sharp pullback before the end of the week.The sentiment is surely rosy right now. The economic recovery appears to be gaining steam, and the Q1 decline everyone predicted might not be as swift as we anticipated- if at all. President Biden's stimulus could officially pass within days as well and provide much-needed relief to struggling businesses and families.Have you seen the vaccine numbers lately, too? More people in the U.S. have now been vaccinated than total cases. On Monday (Feb. 8), vaccine doses outnumbered new cases 10-1. New daily COVID cases have also reached their lowest levels since October.With Johnson and Johnson's (JNJ) one dose vaccine candidate seemingly days away from FDA approval, the outlook is certainly more positive at this point than many anticipated.But we're not out of the woods yet, and three non-pandemic related factors still concern me- complacency, overvaluation, and inflation.Jim Cramer's "Seven Deadly Sins" from Mad Money Monday night (Feb. 8) reflect many of my concerns too:Source: CNBCYes, I know I keep saying to beware. I also know that earnings are on pace to rise by over 20% in 2021. Since 1980, only 12 years have earnings increased by 15% or more. Except for 2018, the market gained an average of 12% in all of those years.But consider some valuation metrics that scream “bubble.”As of February 4, 2021, the Buffett Indicator , or the ratio of the total US stock market valuation to the GDP, was at a level not seen since the dotcom bubble. If you take the US stock market cap of $48.7 trillion and the estimated GDP of $21.7 trillion, we're nearly 224% overvalued and 84% above the historical average.Keep in mind; this chart was dated February 4. This number has only grown since then. Tuesday (Feb. 9) was hardly a down day. If anything, it was plain dull.Fears of a bubble are genuine. The S&P 500’s forward 12-month P/E ratio is back to above 22 and well above the 10-year average of 15.8. The Russell 2000 is also back at a historic high above its 200-day moving average. Tech stock valuations are again approaching dot-com bust levels.Bank of America also believes that a market correction could be on the horizon due to signs of overheating.While I don’t foresee a crash like we saw last March, I still maintain that some correction before the end of Q1 could happen.Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).A correction could also be an excellent buying opportunity for what could be a great second half of the year.Bank of America also echoed this statement and said that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions.”The key word here- buyable.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth.With that said, to sum it up:While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don't think that a decline above ~20%, leading to a bear market will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Small-Caps are Officially Overbought Figure 1- iShares Russell 2000 ETF (IWM)This pains me to write this because I love Russell 2000 small-cap index in 2021.But this is getting ridiculous now.As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks have been on a rampage since November. Since the close on October 30, the IWM has gained nearly 50% and more than doubled ETFs' returns tracking the larger indices. What happened to the Nasdaq being red hot? This chart makes it look like an igloo.Since the close on January 29, the Russell has done just about the same again and gained 11.10%. It’s outperformed all the other major indices by a minimum of 5% in that period.Not to mention, year-to-date, it’s already up a staggering 18%.Small-caps are funny. They either outperform and underperform and can be swayed easily by the news. I foresaw the pullback two weeks ago coming for over a month, and unfortunately, I see the same thing happening now. But only for the short-term.I remain bullish due to aggressive stimulus, which could be put in motion this week.I also love small-cap stocks for the long-term, especially as the world reopens and this Biden agenda gets put in motion. It seems like things are finally trending in the right direction.For now, though, the index is once again overbought.The RSI is at a scorching 75, and I can't justify calling this a BUY or HOLD right now. It's an excellent time to take profits.SELL and take profits. If and when there is a deeper pullback, BUY for the long-term recovery.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold and Silver: Is Recent Rally Cause for Concern?

Gold and Silver: Is Recent Rally Cause for Concern?

Finance Press Release Finance Press Release 10.02.2021 16:54
Does gold’s most recent rally and the inflow of capital into silver change the fundamental outlook of the PMs? If so, what about equities?In short, yes, the U.S. dollar is down, thereby boosting gold. Yes, the recent massive interest in silver has everyone talking about getting in on the action. However, one must remember that markets don’t move in a straight line and countertrend rallies are expected along the way. Keep your eye on the ball. Now, let’s examine what exactly is happening.Gold moved higher once again yesterday (Feb. 9), but it reversed and declined before the closing bell. Miners declined as well. Does it mean that the next top is in or about to be in? That’s exactly what it means. Especially considering that gold’s reversal took place almost right at the triangle-vertex-based reversal and during USD’s breakout’s verification.Figure 1 - USD IndexI previously wrote that because assets don’t move in a straight line, it’s plausible that the USD Index retests its declining resistance line, while gold retests its rising support line. If this occurs, the USDX is likely to decline to the 90.6 range, while gold will receive a short-term boost . I emphasized that the outcome does not change their medium-term trends and the above confirmations signal that the USDX is heading north and gold is heading south.The part that I put in bold is exactly what is being realized right now. The USDX is correcting after the breakout, likely verifying the previous resistance as support.Unless the USDX breaks back below the declining medium-term support line in a meaningful way, the bullish implications for the following weeks will remain intact. At the moment of writing these words, the USD Index is practically right at the support line, which means that it’s quite likely to reverse shortly.Figure 2 - COMEX Gold FuturesGold formed a reversal yesterday, but it ended the session slightly higher. The latter might seem bullish, until one compares that to the size of the daily decline in the USD Index. The move lower in the latter was quite visible, so what we saw in gold should be viewed as USDX’s underperformance and thus a bearish sign.Let’s keep in mind that gold was just at its triangle-vertex-based reversal (based on the declining black resistance line and the rising red support line), which perfectly fits the shape of yesterday’s session – the shooting star reversal candlestick. The implications are bearish.Today, gold moved slightly higher, but the move was too small to change anything. Gold didn’t move above yesterday’s intraday high, which means that the short-term top might already be in.What about silver, did the white metal change anything?Figure 3 - COMEX Silver FuturesNot really. Just like gold, silver is taking a breather after the increased volatility. This is normal.Speaking of silver, please note how big the silver inflows were last week.Figure 4This might seem bullish at first sight – a lot of capital entering the silver market is bound to push the silver price higher, right?Wrong. This could simply be an indication of a temporary (yet massive) increase in the white metal’s potential (which no doubt will be realized, but not necessarily yet), which is something that we tend to see at market tops along with increased interest in terms like “ silver squeeze ” or “ silver manipulation ”.Please compare the first spike that you can see on the above chart with what silver did next (on the following chart).Figure 5Silver declined severely in the first half of 2013. Also please note that at that time, the silver market was already well after the massive monthly volume spike. We saw the same thing in mid-2020.The outlook for silver is very bullish for the next years, but the implications of the above factors are very bearish for the medium term.This is especially the case, since silver and mining stocks tend to decline particularly strongly if the stock market is declining as well. And while the exact timing of the market’s slide is not 100% clear, stocks’ day of reckoning is coming . And it might be very, very close.Eyes Wide ShutAs the NASDAQ Composite records yet another all-time high, investors are sleepwalking through one of the most dangerous equity markets ever.On Feb. 4, I warned that fund managers’ cash positions were frighteningly low.I wrote:Mutual fund managers are now holding less than 2% of their portfolios in cash – an all-time low.Figure 6 - Source: SentimenTraderMoreover, with fear of missing out (FOMO) taking a sledgehammer to valuation, pension funds are also following the bad behavior. If you analyze the chart below, you can see that pension fund cash positions have fallen to 2.6% – also an all-time low.Figure 7 - Source: SentimenTraderAnd with daydreams of riches continuing to transfix rationality, the upward inertia has left equity bears nearly extinct. As of Jan. 15 (the latest data available), S&P 500 short interest has hit its lowest level since the peak of the dot-com bubble.Please see below:Figure 8To explain the importance, fund managers’ cash positions and short sellers are akin to airbags in your car. In the event of a crash, airbags serve their purpose by cushioning the blow. Similarly, when the market crashes, short-sellers cover their positions (by purchasing the underlying asset), helping to alleviate the downward impact. Similarly, when fund managers’ cash positions are high, they have more ‘dry powder’ at their disposal to hit the bid and support prices. As a result, with both variables being excommunicated, nearly every investor is now driving with their pedal to the metal.Also encapsulating the speculative euphoria, last week, technology companies recorded their highest-ever weekly inflow.Please see below:Figure 9And not to be outdone, the Russell 2000 (a proxy for U.S. small caps) is also earning its fair share of speculative gold medals. On Feb. 4, I warned that money was pouring into companies that are on the brink of financial distress.I wrote:Figure 10The red line above represents companies with ‘weak balance sheets.’ Essentially, these are companies with high leverage ratios that rely on a strong economic backdrop to service their debt. At the end of 2019, these companies made up roughly 6% of the Russell 2000 index. Today, that figure has nearly doubled to an all-time high of more than 11%.Moreover, amid investors’ foray into the riskiest corners of the U.S. equity market, they’ve also bid the Russell 2000 (as of Feb. 8) to more than 39% above its 200-day moving average (also an all-time high).Please see below:Figure 11 - Source: thedailyshot.comIgnoring a sound diet, bond investors also continue to feast on junk food. On Feb. 8, the average yield on junk bonds (represented by Barclays U.S. Corporate High-Yield index) fell below 4% for the first-time ever.Please see below:Figure 12In addition, issuances of CCC-rated debt – the riskiest tier of junk – have been massively oversubscribed , as yield-hungry investors throw caution to the wind. More importantly though, the frenzy has lured even riskier companies to the market, with the group raising a record $52 billion in January alone.Even more indicative of the reckless behavior, the riskiest companies are also negotiating the riskiest loan terms. Peddling payment-in-kind (PIK) interest, junk bond issuers are now paying investors with IOUs. Unlike traditional bonds, where fixed cash flows are paid at pre-defined dates, PIK bonds are essentially loans on top of loans. Here, investors forego cash payments and add hypothetical interest payments to their bond’s principal balance. Then, at maturity, investors receive the entire proceeds.And what’s the problem?Well, as I’m sure you can tell, the IOUs are worthless if insolvency strikes first.Moving up the speculative ladder, in January, small traders bought call options at nearly 9x their 2019 pace. For context, ‘ s mall traders’ purchase 10 or less call option contracts and have exposure to 1,000 shares or less. As such, they’re usually the least sophisticated market participants.But because their Delta/Gamma splurge continues to impact dealers’ hedging activity, U.S. equity volume has gone completely parabolic. On Feb. 8, U.S. equities (trading at record prices) exchanged hands at nearly 4x their historical average.Please see below:Figure 13In addition, as more and more first-time buyers dip their toes into the equity pool, the ripple can be felt across Google Search trends. As of Feb. 8, online searches for “penny stocks” have exploded.Figure 14 - Source: thedailyshot.comEven more telling, retail interest in the stock market usually peaks during bouts of volatility. In a nutshell: when the stock market crashes and news outlets cover the story (that otherwise wouldn’t during normal times), it piques the interest of the general public. As a result, crashes tend to bring about investing tourists.Please see below:Figure 15 - Source: SentimenTraderTo explain the chart above, the blue line depicts the trend in “buy stocks” in Google searches over the last ~17 years. If you analyze the first two spikes in October 2008 and March 2020, they occurred alongside extreme market stress. However, if you look at the third spike on the right side of the chart (almost as high as March 2020), it’s occurred alongside U.S. equities current melt-up.The key takeaway?As the equity bubble grows larger, it’s sucking in more and more unsophisticated investors. However, as 2000 proved, overconfidence can give way to fear at the blink of an eye.As the final chart in today’s edition, investors’ belief in a utopian future has also come full circle.Please see below:Figure 16To explain, the white line above depicts the movement of Citigroup’s Global Risk Aversion Macro Index – which uses credit spreads, swap spreads and implied volatility to quantify investors’ perception of risk. As you can see, the index is now back to its pre-pandemic lows. More importantly though, the reading encapsulates all of the above and highlights the excessive complacency underwriting global equities.In conclusion, global stocks are living on a razor’s edge and their margin for error continues to dwindle. And due to gold and silver’s moderate-to-strong correlation with the S&P 500 (250-day correlations of 0.71 and 0.87 respectively), one false step could knock over the entire house of cards. As a result, it’s prudent to consider these cross-asset implications when assessing the future performance of the precious metals. However, once the events reach their precipice, the PMs will be able to resume their long-term uptrend.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold & the USDX: Correlations

1inch Exchange and DeFi Pulse Listing Dispute Divides Community

BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. 12.02.2021 03:50
DeFi Pulse has become the go-to stats provider for the industry, so being left off the list could be detrimental for a project. The 1inch exchange is finding this out the hard way. Just like CoinMarketCap (CMC) in 2017/18, DeFi Pulse has become the standard for metrics and protocol performance for the fledgling financial sector. CMC was bought out by Binance and its integrity became questionable, often being accused of inflating exchange volumes. Now, DeFi Pulse is refusing to list 1inch exchange — but there is more to it than meets the eye. 1inch, which launched an airdrop in December 2020, has requested a listing on DeFiPulse several times. Its latest request on Feb. 9 has also been denied. Hey @defipulse! This is our official second request to list 1inch liquidity protocol on your service! #DeFi is about freedom and you shouldn’t ignore our project with more than $2B TVL just because your founder (Scott) is building a competitor project to our aggregator.— 1inch.exchange (@1inchExchange) February 9, 2021Feuding DeFi Founders The spat goes back to 2019 when 1inch founder, Sergei Kunz, alleged that DeFi Pulse stole its code to build a competing project. DeFi Pulse founder Scott Lewis denied the allegations but the feud escalated epitomizing the state of crypto tribalism that detracts from what the industry is really trying to achieve. There were denial-of-service attacks and even threats of violence between the two founders. Currently, DeFi Pulse refuses to deal with Kunz but said it would cooperate with the 1inch community. It seems that DeFi Prime has also joined forces with Lewis in refusing to list 1inch; Hey @defiprime! Maybe it was not a good idea to remove us from your service? And yes our referrer program works very well: https://t.co/j9gcxuckhQ right!? Everyone who promote 1inch, earn rewards in 1INCH tokens: https://t.co/kYI5Tdg1g8Current reward balance is $114k! pic.twitter.com/DlUz089AJR— 1inch.exchange (@1inchExchange) February 11, 2021DeFiPrime responded; “Everyone already knows about 1inch, and all trading volume in the world lives on 1inch’s 300 servers. There is no point to promote market leaders.” Industry analyst Chris Blec stated that the industry “needs to rid itself of toxic cancel-culture bulls**t.” There is a bizarre editorial campaign underway to try to cancel @1inchExchange & some others from DeFi.The people who control sites like @defipulse and @defiprime are not listing 1inch & other projects they dislike.DeFi needs to rid itself of toxic cancel-culture bullshit.— Chris Blec (@ChrisBlec) February 9, 2021In light of the development a number of leading crypto publications have boycotted DeFi Pulse in favor of competing providers such as DeFi Llama and DappRadar which has also pledged its support for 1inch and DeFi transparency; .@1inchExchange is now listed on our #DeFi rankings page, coming in at #9 with $2.13B total value locked (#TVL) and $1.06B adjusted total value locked (#aTVL).Visit @DappRadar for more information: https://t.co/FebMX9TqH1 pic.twitter.com/e6OxMeXlfu— DappRadar (@DappRadar) February 10, 2021If DeFi Pulse is selective over its listings, then the TVL figure it reports ($40 billion at the time of press) for the entire industry can also be construed as misleading. Also missing from its DeFi listings is the Binance Smart Chain DEX PancakeSwap and NEO’s DeFi platform Flamingo Finance. 1inch TVL Update Naturally, TVL reported across platforms will differ depending on their listings. DeFi Llama reports a total of $57 billion for the industry with 85 protocols listed (compared to DeFi Pulse’s 67). DappRadar meanwhile reports an industry TVL of $39 billion with just 22 listings. Both of these platforms, however, are reporting similar 1inch TVL figures at $2.2 billion. Its native 1INCH token is also doing pretty well, up 8% since the weekly open, trading at $5.32 at the time of press. This is just slightly off its Feb. 6 ATH of $5.83 according to CoinGecko. The post 1inch Exchange and DeFi Pulse Listing Dispute Divides Community appeared first on BeInCrypto.
Gold During the Pandemic Winter

Gold During the Pandemic Winter

Finance Press Release Finance Press Release 12.02.2021 14:36
The pandemic winter will take longer than we thought. The longer we struggle with the coronavirus, the brighter gold could shine.A long, long time ago, there was a bad virus, called the coronavirus , that killed many people all around the world and severely hit the global economy. Luckily, smart scientists developed vaccines that defeated the coronavirus and ended the pandemic . Since then, humankind lived happily – and healthy – ever after.Sounds beautiful, doesn’t it? This is the story we were all supposed to believe. The narrative was that the development of vaccines would end the pandemic and we would quickly return to normalcy. However, it turns out that this was all a fairy tale – the real struggle with the coronavirus is more challenging than we thought .First, the rollout of vaccinations has been very, very slow . As the chart below shows, on February 1, 2021, only about 1.77 percent of Americans became fully vaccinated against COVID-19.Of course, full protection requires two doses, so it takes some time. But in many countries, the share of the population which received at least one dose of the vaccine is also disappointingly low, as the chart below shows.It means that our progress towards herd immunity is really sluggish . At such a pace, we are losing the race between injections and infections. And we will not reach herd immunity until the second half of the year or even the next winter…Second, there is the problem of mutations . The new strains are rapidly popping up which poses a great risk in our fight with the coronavirus. One of these new variants was identified in the United Kingdom and quickly spread through the country. Although it’s not more lethal, it’s more infectious, which makes it more dangerous overall. And the more variants emerge, it’s more likely that we could see a mutation resistant to our current treatments and vaccines. Indeed, some of the mutations change the surface protein, spike, and have been shown to reduce the effectiveness of combating the coronavirus by monoclonal antibodies.The really bad part is that these two problems are strongly connected. The longer the vaccinations take, the more active cases we have. The more active cases we have, the more mutations happen, as each new infection implies more copies of the coronavirus, which gives it more chances to mutate. The more mutations occur, the higher the odds of a really nasty strain. Therefore, the longer the vaccination process takes, the more probable it is that it will not work and that vaccine-resistant variants might emerge.Given that in many countries vaccinations are practically the only rational strategy to fight the virus, the vaccine-resistant strain would be a serious blow. Surely, some vaccines could be relatively easily updated, but their rollout would still require time – time we don’t have.What does it all imply for the gold market? Well, the more sluggish the vaccinations, the higher the risk that something goes wrong and that our battle with COVID-19 will take more time. The longer the fight, the slower the economic recovery. The longer and bumpier road toward herd immunity, the slower lifting sanitary restrictions and social distancing measures, and the later we come back to normalcy. The longer we live in Zombieland, the easier fiscal and monetary policies will be, and the brighter gold will shine.Another issue is that we shouldn’t forget about the possibility of the pandemic’s long economic shadow. A recent paper has examined the effects of 19 major previous pandemics, finding a long shadow of the economic carnage. Although financial markets are still (wrongly, I believe) betting on a V-shaped recovery, the history suggests that a double dip is likely, as eight of the last 11 recessions experienced it. Recessions sound golden, don’t they?However, there is one caveat here. The sensitivity of economic activity to COVID-19 infections and restrictions has significantly diminished since the Great Lockdown in the spring of 2020. There are three reasons for that. First, people fear the coronavirus less. Second, epidemic restrictions are better targeted and implemented. Third, entrepreneurs adopted better to cope with the epidemic.The greater resilience of the economy means a smaller downturn and fewer long-term scars, which will limit any upward COVID-19 related impact on gold prices . But a softer economic impact also implies a quicker recovery, which – together with the upcoming big government stimulus – could increase consumer prices, thus supporting gold prices through the inflation channel. Indeed, commodity prices have been surging in 2021, so gold may follow suit.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
A Sleepy Week for the Indices?

A Sleepy Week for the Indices?

Finance Press Release Finance Press Release 12.02.2021 15:45
For once, we have a week in 2021 where the market really didn't move all that much.Except for weed stocks that whipsawed GameStock-like and Bitcoin and Dogecoin making waves thanks to Lord Elon, it's really been kind of a boring week for the major indices.The S&P and Nasdaq closed at another record high Thursday (Feb. 11), while the Dow barely retreated from its own record high. The red-hot Russell has lagged this week.However, it’s all relative. No index has moved upwards or downwards more than about 0.30% week-to-date.It’s about time we had a week of relative quiet in the market.The sentiment is indeed still rosy right now. The economic recovery appears to be gaining steam, and the Q1 GDP decline everyone predicted might not be as sharp as we anticipated. We could also be days away from trillions of dollars of much-needed stimulus getting pumped into the economy.Earnings continue to impress, too, and are on pace to rise by over 20% in 2021. Since 1980, only 12 years have earnings increased by 15% or more. Except for 2018, the market gained an average of 12% in all of those years.We could also days away from FDA approval of a one-dose vaccine from Johnson and Johnson (JNJ).The COVID numbers and vaccine trend could truly turn the tide of things. More people in the U.S. have now been vaccinated than total cases, and the week kicked off (Feb. 8) with vaccine doses outnumbering new cases 10-1. Dr. Fauci also claims that vaccines could be available to the general public by April.But we're not out of the woods yet. Sure this week has been calm.But it’s almost been “too calm.”I still worry about complacency, valuations, and the return of inflation.“You wouldn’t know it from the sedate action in the averages,” but Wall Street is on “a highway to the danger zone,” CNBC ’s Jim Cramer said.“In a frothy market, stocks will have enormous rallies that are totally disconnected from the underlying fundamentals.”He’s not wrong.Look at the Buffett Indicator as of February 4. Where I track this indicator usually updates once a week and shows the total U.S. stock market valuation to the GDP. If you take the US stock market cap of $48.7 trillion and the estimated GDP of $21.7 trillion, we're nearly 224% overvalued and 84% above the historical average. This ratio has not been at a level like this since the dotcom bubble.Worse? This chart was dated February 4. The market’s only risen since then.This is what I mean by don’t be fooled by the relative calm of this week.The S&P 500’s forward 12-month P/E ratio is also well above its 10-year average of 15.8. The Russell 2000 is also back at a historic high above its 200-day moving average. Tech stock valuations are again approaching dotcom bust levels.Still not sold? Look at Goldman’s non-profitable tech index. It’s approaching an absurd 250% year-over-year performance.Bank of America also believes that a market correction could be on the horizon due to signs of overheating.While I don’t foresee a crash like we saw last March, I still maintain that some correction before the end of Q1 could happen.Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).A correction could also be an excellent buying opportunity for what could be a great second half of the year.Bank of America also echoed this statement and said that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions.”The key word here- buyable.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth.With that said, to sum it up:While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don't think that a decline above ~20%, leading to a bear market will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. The Streaky S&P Is Back at a Record Figure 1- S&P 500 Large Cap Index $SPXThe S&P continues to trade as a streaky index. It seemingly rips off multiple-day winning streaks or losing streaks weekly.After the S&P 500 ripped off a streak of gains in 6 of 7 days, it promptly went on a 3-day losing streak, followed by another record close.I would hardly call that a 3-day losing streak, though. I’d even say it was a boring week for the S&P 500 with muted moves.The outlook is healthy, though, especially when you consider earnings. More than 80% of S&P stocks that have reported earnings thus far have beaten estimates.What could be on tap for next week? Who even knows anymore. But if earnings keep on outperforming, and the sentiment remains stable, it could be another strong week.The S&P’s RSI is ticking up towards overbought. However, because it’s still below 70, and because of the streaky manner in which the index has traded, it remains a HOLD.A short-term correction could inevitably occur by the end of Q1 2021, but for now, I am sticking with the S&P as a HOLD.For an ETF that attempts to directly correlate with the performance of the S&P, the SPDR S&P ETF (SPY) is a good option.For more of my thoughts on the market, such as red-hot small-caps and emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Microsoft and Enjin Roll Out NFT-Based Reward System to Praise Women in Science

Microsoft and Enjin Roll Out NFT-Based Reward System to Praise Women in Science

BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. 12.02.2021 10:26
Microsoft has teamed up with gaming-based blockchain platform Enjin to roll out customizable non-fungible tokens (NFTs). The tokens will be compatible and transferrable with sandbox-adventure video game Minecraft. According to an announcement made on Feb. 11, the initiative, the brainchild of both companies, has been launched to mark International Day of Women and Girls in Science. To mark the occasion, Microsoft has unveiled Enjin’s blockchain-based Azure Space Mystery mini-game which distributes exclusive NFTs as rewards among the community for performing learning tasks. “Players will work to save the International Space Station, while learning from and celebrating prominent European female scientists, including Caroline Herschel, Mary Somerville, Hypatia and Raymonde de Laroche,” the announcement reads. Following Azure Mystery Mansion and Azure Maya Mystery we present to you: #AzureSpaceMystery https://t.co/JEeQeJD2x8 Complete this text-based game and get to know amazing women in (space) technology pic.twitter.com/j5e4DGo0O0— Microsoft Developer Western Europe (@Msdev_WE) February 11, 2021Enjin’s Other Recent Developments In recent months, Enjin has been actively partnering with tech companies around the world. Last December, the blockchain firm revealed a collaboration with Atari, one of the oldest names in the video game industry. The partnership is set to bring the development of a decentralized gaming ecosystem, wherein Enjin will be creating Atari-based NFTs usable in its gaming portfolio. Last month, the world saw the partnership between Enjin and Kizuna and Miss Bitcoin to launch an NFT charity program. Kizuna is a hub for bitcoin (BTC) donations with no handling fees, and Miss Bitcoin is a popular blockchain entrepreneur. As BeInCrypto previously reported, the first campaign of the philanthropic program will involve tokenized art created by Japanese artists. Funds raised from the campaign will be directed to the Dream Possibility (DxP), a non-profit organization providing help for teenagers facing coronavirus-related issues. Moreover, in January, Enjin gained approval from the Japanese Virtual Currency Exchange Association to have its native ENJ token approved in Japan. To receive it, Enjin went through a year-and-a-half regulatory due diligence. NFTs Have Become Increasingly Popular NFTs are indeed gaining traction these days. On Feb. 10, for example, Pokemon-inspired blockchain gaming platform Axie Infinity reported the largest NFT sale in history. A user going by the moniker “Flying Falcon” doled out 888.25 ethereum (ETH) (approximately $1.5 million, at the time). The new owner of the NFT set commented: “We’re witnessing a historic moment; the rise of digital nations with their own system of clearly delineated, irrevocable property rights. Axie land has entertainment value, social value, and economic value in the form of future resource flows.” As DeFi researcher Cooper Turley outlined in his recent blog post, there are already almost 50 different platforms to mint NFTs. The post Microsoft and Enjin Roll Out NFT-Based Reward System to Praise Women in Science appeared first on BeInCrypto.
S&P 500 Correction Delayed Again While Silver Runs

S&P 500 Correction Delayed Again While Silver Runs

Monica Kingsley Monica Kingsley 15.02.2021 14:15
The window of opportunity for the stock bears is slowly but surely closing down as Friday‘s gentle intraday peek higher turned into a buying spree before the closing bell. The sentiment readings and put/call ratio are at the greed, euphoric and compacent end of the spectrum again. I asked on Friday:(…) How long can it last, and what shape the upcoming correction would have? Right now, the warning signs are mounting, yet the bears shouldn‘t put all their eggs into the correction basket really, for it shapes to be a shallow one – one in time, rather than in price.Today, I‘ll say that waiting for a correction is like waiting for Godot. Trust me, I have come to experience quite some absurd and Kafkaesque drama not too long ago. What an understatement.One week ago, I called the dollar as making a local top, and look where we are in the process. Coupled with the steepening pace of rising long-dated Treasury yields, that‘s a great environment for financials (XLF ETF) as they benefit from the widening yield curve.Gold remains a drag on the precious metals performance, with silver and platinum flying. The miners‘ outlook and internal dynamics between various mining indices, provides a much needed proof to those short on patience. Little wonder, after 5+ months of downside correction whose target I called on Aug 07 in the article S&P 500 Bulls Meet Non-Farm Payrolls. Little wonder given the monstrous pace of new money creation beating quite a few prior interventions combined.Yet, the precious metals complex is coming back to life as the economic recovery goes on, and will get new stimulus fuel. Commodity prices are rising steeply across the board, yet inflation as measured by CPI, will have to wait for the job market to start feeling the heat, which it obviously doesn‘t in the current pace of job creation and low participation rate. Until labor gets more powerful in the price discovery mechanism (through market-based dynamics!), the raging inflationary fire will be under control, manifesting only in (financial) asset price inflation. That‘s precisely what you would expect when new money is no longer sitting on banks‘ balance sheets, but flowing into the economy. Again quoting my Friday‘s words:(…) One more note concerning the markets – in our print-and-spend-happy world, where the give or take $1.9T stimulus will sooner or later come in one way or another, we better prepare on repricing downside risk in the precious metals, and also better not to fixate on the premature bubble pop talk too closely. I have been stating repeatedly that things have to get really ridiculous first, and this just doesn‘t qualify yet in my view. All those serious correction calls have to wait – in tech and elsewhere, for we‘re going higher overall – like it or not.Let‘s get right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsThe weekly S&P 500 chart is still one of strength, without a top in sight. And the lower volume, I don‘t view as concerning at all.After a three day sideways consolidation, stock bulls forced a close higher on Friday. Low volume, but still higher prices. The bears missed an opportunity to act, having hesitated for quite a few days. Not that the (big picture) path of least resistance weren‘t higher before that, though.The market breadth indicators got a boost on Friday, but it‘s especially the new highs new lows that have a way to go. One would expect a bigger uptick given Friday‘s price advance, but the overall message is still one of cautious but well grounded optimism.Credit Markets, Treasuries and DollarThe high yield corporate bonds to short-term Treasuries (HYG:SHY) ratio performance is lining up nicely with the S&P 500 one, and definitely isn‘t flashing a warning sign for the days to come.Long-term Treasuries are declining at a faster pace than has been the case in late 2020, which is (not immediately right now, but give it time and it‘ll turn out to be) concerning. Thus far though, the money flows are positive for the stock (and other risk on) markets as the liquidity tide keeps hitting the tape.Who suffers? The dollar. No, it‘s not breaking higher (retracing breakout before a run higher – no) above the 50-day moving average or any way you draw a declining resistance line on higher time frames. The greenback is getting ready for another powerful downleg.Gold and SilverGold bulls have repelled another selling wave, which was however not the strongest one. The fact there was one in the first place even, is more (short-term) concerning for the gold bulls. But please remember that it was first gold that got it right in jumping higher on the unprecedented money printing spree as we entered spring 2020, followed by copper, base metals, agricultural commodities, and also oil now (remember my recent bullish calls for over $80 per barrel in less than 2 years). Gold keeps catching breath, frustrating the bulls who „know“ it can only go higher, but its spark isn‘t there at the moment. A perfect example is Monday‘s session thus far – spot gold 0.25% down, spot silver 1.25% up. It‘s been only on Friday when I touted the gold-silver spread trade idea as not having exhausted its potential yet, not by a long shot:(…) For those inclined so, I am raising the arbitrage trade possibility. Long silver, short gold would be consistent with my prior assessment of the gold-silver ratio going down. Similarly to bullish gold bets, that‘s a longer-term trade, which however wouldn‘t likely take much patience to unfold and stick.Silver keeps acting in a bullish way, tracking commodities ($CRB) performance much better than gold does at the moment. While both are a bullish play with the many factors arrayed behind their upcoming rise, it‘s silver that will reap the greatest rewards – today and in the days and weeks ahead. Gold and Silver MinersBack to the beaten down and underperforming gold. See that the yellow metal still isn‘t following the rising yields all that closely these days. Decoupling from the Treasury yields bodes well for precious metals universally, and it‘s precisely what you would expect given the (commodity) inflation, twin deficits biting, and the dollar balancing on the brink.The miners examination also proves no change in the underlying bullish dynamic that is largely playing out below the surface. We‘re seeing the continued outperformance of junior gold miners vs. the seniors, and also the great burst of life in the silver miners – these are outperforming ever more visibly the rest of the mining companies.This is a long awaited chart to flip bullish. Thus far, we have had one recent bullish divergence only (the GDX refusal to break to new lows when gold broke below its Jan lows) – once gold miners start leading the yellow metal, the sentiment in the precious metals community would get different compared to today really.SummaryThe deterioration in stock market got postponed with the latter half of Friday bringing in fresh buying pressure. Would the bears appear, at least to rock the boat a little? They had a good chance all the prior week, but didn‘t jump at the opportunity. Their window is closing, slowly but surely. The stock bull run is on, and there are no signals thus far pointing to an onset of a deeper correction soon.The gold bulls continue lagging behind their silver counterparts, predictably. That‘s the objective assessment regardless of unprecendented monetary and fiscal policies, unfolding real economy recovery, inflation cascading through the system, and the dollar struggling to keep its head above water. The new upleg keeps knocking on the door, and patience will be richly rewarded (unless you took me up on the gold-silver arbitrage trade, and are popping the champagne already).
Still No S&P 500 Correction, Still No Real Change in the Metals

Still No S&P 500 Correction, Still No Real Change in the Metals

Monica Kingsley Monica Kingsley 16.02.2021 16:11
Yesterday‘s thin volume session didn‘t bring any material changes as the window of opportunity for the stock bears to act, is slowly but surely closing down. Friday‘s intraday move brought increasingly higher prices, and Monday‘s trading extended gains even more. Euphoric, complacent greed as evidenced by the sentiment readings and put/call ratios, is on.I asked on Friday:(…) How long can it last, and what shape the upcoming correction would have? Right now, the warning signs are mounting, yet the bears shouldn‘t put all their eggs into the correction basket really, for it shapes to be a shallow one – one in time, rather than in price.Both on Monday and today, I‘ll say that waiting for a correction is like waiting for Godot. Right from the horse‘s mouth as my personal experience with quite some absurd and Kafkaesque drama got richer recently.The dollar keeps topping out, which I called it to do a week ago – and its losses have been mounting since. Long-dated Treasury yields are rising in tandem, which is a great environment for financials (XLF ETF) and emerging markets (EEM ETF). The former benefit from the widening yield curve, the latter from plain devaluation.Gold performance is still short-term disappointing, and silver and platinum are leading. But it‘s the miners and the moves between various mining indices, that work to soothe the bulls‘ impatience. Understandable as we are in 5+ months of downside correction whose target I called on Aug 07 in the article S&P 500 Bulls Meet Non-Farm Payrolls, witnessing record pace of new money creation.The ongoing economic recovery will get new stimulus support, and that will work to broaden the precious metals advance. Commodity prices are universally rising, and over time, inflation as measured by CPI, will do so too. But not until the current pace of job creation picks up and participation rate turns – we‘re far from that moment. Until then, inflation will be apparent only in (financial) asset prices, which is in line with new money no longer sitting on banks‘ balance sheets, but flowing into the real economy. Again quoting my Friday‘s words:(…) One more note concerning the markets – in our print-and-spend-happy world, where the give or take $1.9T stimulus will sooner or later come in one way or another, we better prepare on repricing downside risk in the precious metals, and also better not to fixate on the premature bubble pop talk too closely. I have been stating repeatedly that things have to get really ridiculous first, and this just doesn‘t qualify yet in my view. All those serious correction calls have to wait – in tech and elsewhere, for we‘re going higher overall – like it or not.Let‘s get right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsThe bulls had an opportunity to act for quite a few days in a row, yet missed it. Their inaction confirms that the path of least resistance for stocks is to still rise.The market breadth indicators have improved on Friday, but especially the new highs new lows has a way to go. It could have ticked upwards more given Friday‘s price advance, but didn‘t. The put/call ratio has moved upwards (see chart below), but the overall message is still one of cautious yet reasonable optimism – not enough to trigger the sizable correction quite some participants are constantly awaiting.Credit Markets, Treasuries and DollarThe high yield corporate bonds to short-term Treasuries (HYG:SHY) ratio performance isn‘t out of whack with the S&P 500, but the investment grade corporate bonds to longer dated Treasuries (LQD:IEI) are not confirming exactly. Before the corona crash, the high yield ones were leading the investment grade ones for countless quarters. From the Mar 2020 bottom, the investment grade ones were in the pool position. And since the end of Dec 2020, the high yield ones are leading again, but investment grade ones aren't going up anymore, but down the way long-term Treasuries do. One more sign of the euphoric stage in stocks we're in.Long-term Treasuries are the chart to watch for the market to throw a fit – or not. They‘re declining at a faster pace than has been the case in late 2020, which can bring about trouble - not immediately right away, but over time it can turn out so. The dynamic of money moving into the stock market is thus far still positive as the many risk on assets are gaining on the fast pace of new money creation. The worry about a sudden, sharp reversal is misplaced for now.The dollar is on the receiving end – there is no breakout verification before a run higher in progress – no. Neither above the 50-day moving average, nor any way you draw a declining resistance line on higher time frames. The greenback is about to test and break below its 2021 lows. Solidly below.Gold and SilverGold bulls stood their ground on Friday, yet their yesterday‘s and today‘s performance is rather weak. Not disastrously so, but still indicative of the headwinds gold bulls face. Gold‘s spark isn‘t there at the moment. Putting it into context, please remember that it was first gold that jumped in the unrivalled money printing era arrival in spring 2020, followed by copper, base metals, agricultural commodities, and also oil now (remember my recent bullish calls for over $80 per barrel in less than 2 years). Silver price action is the bullish one, in line with commodities ($CRB) performance being much stronger now. Silver is definitely better positioned to benefit from the upcoming precious metals rise – today and in the days and weeks ahead. Gold and Silver MinersThe heat gold is taking from rising Treasury yields, is also progressively weaker. The decoupling from rising nominal (real) yields bodes well for precious metals universally, and it‘s precisely what you would expect given the (commodity) inflation, twin deficits, and the dollar on the brink.Gold to all corporate bonds chart reflects the current dillydallying nicely. Gold isn‘t breaking down into a bearish downtrend. The miners examination also proves no change in the underlying bullish dynamic playing out below the surface. Junior gold miners are oputperforming. the seniors, and there is also the great burst of life in the silver miners – these are outperforming ever more visibly the rest of the crowd.Once this chart flips bullish, we have the new upleg clearly visible. Thus far, we have had one recent bullish divergence only (the GDX refusal to break to new lows when gold broke below its Jan lows) – once gold miners start leading the yellow metal, the sentiment in the precious metals community would get different compared to today really.SummaryThe deterioration in stocks got postponed as both Friday and Monday brought new buyers into the market. Would the bears appear, at least to rock the boat a little? I stand by my call that they had a good chance all the prior week, but didn‘t jump at the opportunity – their window is closing, slowly but surely. The stock bull run is on, and there are no signals thus far pointing to an onset of a deeper correction soon.The gold bulls continue lagging behind their silver counterparts, predictably, with both under pressure in Tuesday‘s premarket. Coupled with the miners‘ signals, and unprecendented monetary and fiscal stimulus, unfolding real economy recovery, inflation making its way through the system, and the dollar struggling to keep its head above water, the new PMs upleg is a question of time.
Got Bond Concerns?

Got Bond Concerns?

Finance Press Release Finance Press Release 17.02.2021 15:25
The market largely continued last week’s mixed moves, with the S&P and Nasdaq mildly retreating from record highs and the Dow eking out another record close.The sentiment remains mostly rosy thanks to earnings that continue to impress, plummeting virus numbers worldwide, indicators that the economic recovery is gaining steam, and imminent stimulus.But we’re not out of the woods yet, and I still worry about complacency and valuations.But now, you can add one more concern to the list- rising bond yields.On Tuesday (Feb. 16), the 10-year Treasury yield jumped 9 basis points to top 1.30% for the first time since February 2020. The 30-year rate also hit its highest level in a year.Why is this concerning?Rising interest rates=less attractive stocks.Sure, the banks benefit. But what do you think this means for growth sectors such as tech that have benefited from low-rates?You couple that with the fact that according to the Buffet Indicator (Total US stock market valuation/GDP), the market could be 228% overvalued, and tech stocks may be at valuations not seen since the dotcom bubble? Genuine concerns.A rebound in rates could also put a dent in the economic recovery if both companies and consumers find it increasingly expensive to borrow.While I don’t foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of Q1 could happen.Bank of America also echoed this statement and said last week that “We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions.”Corrections are healthy and normal market behavior, and we are long overdue for one. They are also way more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).A correction could also be an excellent buying opportunity for what could be a great second half of the year.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:While there is long-term optimism, there are short-term concerns. A short-term correction between now and the end of Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market, will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. The Streaky S&P Is Back at a Record Figure 1- S&P 500 Large Cap Index $SPXThe S&P continues to trade as a streaky index. It seemingly rips off multiple-day winning streaks or losing streaks weekly.Before Tuesday’s (Feb. 16) “decline” (if you can call it that), here’s how the S&P has traded in February. It kicked off the month by ripping off a streak of gains in 6 of 7 days. It then promptly went on a 3-day losing streak, followed by a two-day winning streak and more record closes.Then it declined a 0.06% to kick off the President’s Day shortened trading week.More than 80% of S&P stocks that have reported earnings have beaten estimates, which is quite impressive. Yes, the forward P/E ratio is historically high. However, this P/E ratio has coincided with growing earnings.With the index also up 5.9% month-to-date and a healthy outlook for the second half of the year, we could have some more room to run.While the S&P’s RSI is still hovering around overbought levels, it’s remained stable at a HOLD level, mainly reflecting its muted moves over the last week and change.A short-term correction could inevitably occur by the end of Q1 2021, but for now, I am sticking with the S&P as a HOLD.For an ETF that attempts to directly correlate with the performance of the S&P, the SPDR S&P ETF (SPY) is a good option.For more of my thoughts on the market, such as red-hot small-caps and emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Is That the S&P 500 And Gold Correction Finally?

Is That the S&P 500 And Gold Correction Finally?

Monica Kingsley Monica Kingsley 17.02.2021 16:21
The stock bears finally showed they aren‘t an extinct species – merely a seriously endangered one. Yesterday‘s close though gives them a chance to try again today, but they should be tame in expectations. While there is some chart deterioration, it‘s not nearly enough to help fuel a full on bearish onslaught in the S&P 500. There is no serious correction starting now, nothing to really take down stocks seriously for the time being.The Fed remains active, and monetary policy hasn‘t lost its charm (effect) just yet. Commodities and asset price inflation has been in high gear for quite some time, yet it‘s not a raging problem for the Main Street as evidenced by the CPI. Food price inflation, substitution and hedonistic adjustments in its calculation, are a different cup of tea, but CPI isn‘t biting yet.Meanwhile, the real economy recovery goes on (just check yesterday‘s Empire State Manufacturing figures for proof), even without the $1.9T stimulus and infrastructure plans. Once we see signs of strain in the job market (higher participation rate, hourly earnings and hours worked), then the real, palpable inflation story can unfold. But we‘re talking 2022, or even 2023 to get there – and the Fed will just let it overshoot to compensate for the current and prior era.Meanwhile, the wave of new money creation (we‘re almost at double the early 2020 Fed‘s balance sheet value - $4T give or take then vs. almost $7.5T now – and that‘s before the multiplier in commercial banks loan creation kicks in) keeps hitting the markets, going into the real economy, predictably lifting many boats. It‘s my view that we have to (and will) experience a stock market bubble accompanied by the precious metals and commodities one – to a degree, simultaneously, for the stock market is likely to get under pressure first. Again, I am talking the big picture here – not the coming weeks.Meanwhile, the intense talk of S&P 500 correction any-day-week-now is on, just as outrageous gold, silver and miners‘ drop projections. Let‘s examine the bear market is gold – some say that the late 2015 marked bottom, I‘m of the view that the 2016 steep rally was a first proof of turning tide. But the Fed got serious about tightening (raising rates, shrinking its balance sheet), and gold reached the final bottom in Aug 2018. Seeing through the hawks vs. dove fights at the Fed in the latter half of 2018 (December was a notable moment when Powell refused to the markets‘ bidding, remained hawkish in the face of heavy, indiscriminate selling across the board – before relenting).Since then, gold was slowly but surely gathering steam, and speculation in stocks was on. The repo crisis of autumn 2019 didn‘t have a dampening effect either – the Fed was solidly back to accomodative back then. These have all happened well before corona hit – and it wasn‘t able to push gold down really much. The recovery from the forced selling, this deflationary episode (which I had notably declared back in summer 2020 to be a one-off, not to be repeated event), was swift. Commodities have clearly joined, and the picture of various asset classes taking the baton as inflation is cascading through the system, is very clear.Quoting from my yesterday‘s analysis:(…) The dollar keeps topping out, which I called it to do a week ago – and its losses have been mounting since. Long-dated Treasury yields are rising in tandem, which is a great environment for financials (XLF ETF) and emerging markets (EEM ETF). The former benefit from the widening yield curve, the latter from plain devaluation.Gold performance is still short-term disappointing, and silver and platinum are leading. But it‘s the miners and the moves between various mining indices, that work to soothe the bulls‘ impatience. Understandable as we are in 5+ months of downside correction whose target I called on Aug 07 in the article S&P 500 Bulls Meet Non-Farm Payrolls, witnessing record pace of new money creation.The ongoing economic recovery will get new stimulus support, and that will work to broaden the precious metals advance. Again quoting my Friday‘s words:(…) in our print-and-spend-happy world, where the give or take $1.9T stimulus will sooner or later come in one way or another, we better prepare on repricing downside risk in the precious metals, and also better not to fixate on the premature bubble pop talk too closely. I have been stating repeatedly that things have to get really ridiculous first, and this just doesn‘t qualify yet in my view. All those serious correction calls have to wait – in tech and elsewhere, for we‘re going higher overall – like it or not.Let‘s get right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookFinally, there is a whiff of bearish activity. Will it last or turn out a one day event as thus far in Feb? The chances for a sideways correction to last at least a little longer, are still on, however the short- and medium-term outlook remains bullish.Credit Markets and TreasuriesHigh yield corporate bonds (HYG ETF) wavered yesterday, trading in a sideways pattern during recent days. Encouragingly, yesterday‘s session attracted increasing volume, which I read as willingness to buy the dip. One dip and done?Long-term Treasuries (TLT ETF) are the key chart on my radar screen right now. The rise in yields is accelerating, and if progressing unmitigated, would throw a spanner into many an asset‘s works. Even though it‘s not apparent right now, there is a chance that we‘ll see a slowdown, even a temporary stabilization, over the coming sessions. The larger trend in rates is higher though, and in the dollar to the downside.Gold, Silver and CommoditiesThe heat gold is taking from rising Treasury yields, has gotten weaker recently, with the decoupling from rising nominal (real) yields being a good omen for precious metals universally. The dynamics of commodity price inflation, dollar hardly balancing under the weight of unprecedented economic policy and twin deficits, attests to the gold upleg arriving sooner rather than later.Let‘s step back, and compare the performance of gold, silver, copper and oil. The weekly chart captures the key turns in monetary policy, the plunge into the corona deflationary bottom, and crucially the timing and pace of each asset‘s recovery. Gold and silver were the first to sensitively respond to activist policies, followed by copper, and finally oil. Is their current breather really such a surprise and reversal of fortunes? Absolutely not.SummaryThe bearish push in stocks has a good chance of finally materializing today. How strong will its internals be, will it entice the bulls to step in – or not yet? The stock bull run is firmly on, and there are no signals thus far pointing to an onset of a deeper correction with today‘s price action.The gold bulls continue lagging behind their silver counterparts, predictably, with both under continued pressure. The yields are rising a bit too fast, taking the metals along – temporarily, until they decouple to a greater degree. Combined with the miners‘ signals, and unprecendented monetary and fiscal stimulus, unfolding real economy recovery, inflation making its way through the system, and the dollar struggling to keep its head above water, the new PMs upleg is a question of time.
Gold & the USDX: Correlations

Will Biden Overheat the Economy and Gold?

Finance Press Release Finance Press Release 19.02.2021 13:14
Under the Biden administration the economy could overheat, thereby increasing inflation and the price of gold.In January, Biden unveiled his plan for stimulating the economy, which is struggling as the epidemic in the U.S. continues to unfold. Pundits welcomed the bold proposal of spending almost $2 trillion. Some expenditures, especially on vaccines and healthcare, sound pretty reasonable. However, $1.9 trillion is a lot of money! And a lot of federal debt , as the stimulus would be debt-funded!So, there is a risk that Biden’s package would overheat the economy and increase inflation . Surprisingly, even some mainstream economists who support the deficit spending, notice this possibility. For instance, former Treasury Secretary Larry Summers, said that Biden’s stimulus could lead the economy to overheat, and that the conventional wisdom is underestimating the risks of hitting capacity. Although he doesn’t oppose the idea of another stimulus, Summers noted that “if we get Covid behind us, we will have an economy that is on fire”.Indeed, this is a real possibility for good reasons. First, the proposed package would not only be large in absolute terms (the nominal amount), but also relative to the GDP . According to The Economist , Biden’s proposal is worth about nine percent of pre-crisis GDP, nearly twice the size of Obama’s aid package in the aftermath of the Great Recession .And the stimulus is also large relative to the likely shortfall in the aggregate demand. I’m referring here to the fact that the winter wave of the coronavirus would be less harmful for the economy – and that there have already been big economic stimuli added last year, including a $900 billion package passed no earlier than in December.Oh yes, politicians were really spendthrift in 2020, and – without counting the aid passed in December – they injected into the economy almost $3 trillion, or about 14 percent of pre-crisis GDP, much more than the decline in the aggregate demand. In other words, the policymakers added to the economy more money that was destroyed by the pandemic .But the tricky part is that Americans simply piled up most of this cash in bank accounts, or they used it for trading, for instance. Given the social-distancing measures and limited possibilities to spend money, this outcome shouldn’t actually be surprising. However, the hoarding of stimulus shows that it has not yet started to affect the economy – but that can change when the economy fully reopens and people unleash the hoarded money. If all this cash finally reaches the markets, prices should go up.You see, the current economic downturn is unusual. It doesn’t result from the fact that Americans don’t have enough income and cannot finance their expenditures. The problem is rather that people cannot spend it even if they wanted to. Indeed, economic disruption and subdued consumer spending are concentrated in certain sectors that are most sensitive to social distancing – such as the leisure, transport and hospitality industries – rather than spread widely throughout the whole economy. So, when people will finally be able to spend, they will probably do so, possibly accelerating inflation .As well, normally the Fed would tighten its monetary policy to prevent the rise in prices. But now the U.S. central bank wants to overshoot its inflation target, so it would not hike interest rates only because inflation raises to two percent or even moderately above it.Another potential inflationary driver is dollar depreciation, which seems likely, given the zero-interest rates policy and the expansion in the U.S. twin deficit .Hence, without the central bank neutralizing the fiscal exuberance, it’s possible that Biden’s plan would overheat the economy, at least temporarily. Of course, that’s not certain and given the small Democrats’ majority in Congress, the final stimulus could be lower than the proposed $1.9 trillion. But it would remain large and on top of previous aid packages and pent-up demand, which makes the overheating scenario quite likely.Actually, investors have already started to expect higher inflation in the future – as the chart below shows, the inflationary expectations have already surpassed pre-pandemic levels.From the fundamental perspective, this is good news for the gold market. After all, gold is bought by some investors as an inflation hedge . Moreover, the acceleration of inflation would lower real interest rates , keeping them deeply in negative territory, which would also be positive for the yellow metal.So, although the expectations of higher fiscal stimulus plunged gold prices in January, more government spending – and expansion in budget deficits and public debt – could ultimately turn out to be supportive factors for gold. Especially if easy fiscal policy will be accompanied by the accommodative monetary policy – in particular quantitative easing and a rising Fed’s balance sheet – and inflation.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Why the Sky Is Not Falling in Precious Metals

Why the Sky Is Not Falling in Precious Metals

Monica Kingsley Monica Kingsley 19.02.2021 16:03
Stocks are predictably staging a continued recovery from the mostly sideways correction – a shallow one not strong enough to break the bulls‘ back. Credit markets are largely behaving – with the exception of long-term Treasuries, which I see as highly likely to draw the Fed‘s attention – just as I discussed in detail yesterday. The S&P 500 keeps doing fine, and so does my open position there – in the black again. On one hand, volatility remains low regardless of intraday attempts to rise, on the other hand, the put/call ratio has risen quite high yesterday – it‘s as if the traders are expecting a shoe to drop, similarly to the end of Jan. Will it, is there any on the horizon?Treasuries at the long-end are falling like a stone, and those on the short end (3-months) are seeing higher prices in 2021. The bond market is clearly under pressure, and exerting influence primarily upon precious metals (and commodities such as oil, which are experiencing a down day today, after quite a string of foreseeable gains). The bearish sentiment in gold and miners is running rampant, and it‘s been only yesterday when I answered a question on ominous head and shoulders patterns in the making, at my own site. This clearly illustrates the razor edge we‘re at in precious metals:(…) This is more often than not the case with H&S patterns – they are not the most reliable ones, highly judgemental at times, and their targets are more often than not far away, which makes them a not fully reliable trading proposition when a long enough time (trade) series is taken. I rather look at what is driving individual moves – which asset classes influence it the most at a given time? Where to look for so as to get most precise information? With gold and gold miners (they still trade quite tightly together), it's the Treasury yields on the long end.As I wrote in today's (Feb 18) precious metals report, despite the new 2021 lows in TLT, gold isn't amplifying the pressure – it's trading well above the $1,770 level, and enjoys a stronger session today than silver. Look at the gold – TLT evolving relationship, as that's the key determinant right now. The post-Nov dynamic speaks in gold's favor – under the surface. Don't underestimate the Fed either.Plenty to talk and cover in the precious metals really – just as usual at such crossroads. Let‘s briefly recap all the ducks lining up in stocks first.Let‘s get right into the charts (all courtesy of www.stockcharts.com).S&P 500 and VolatilityRepeated lower knots mark a refusal to decline as the daily dips keep being bought. Given the constructive developments in high yield corporate bonds and its key ratio (HYG and HYG:SHY), I fully expect the uptrend to keep reasserting itself once again. The talk about a top, imminent correction or stretched valuations, is still premature.The best known volatility measure is still refusing to rise on a lasting basis, indicating that the environment remains favorable to higher stock prices.Dollar and TreasuriesThe world reserve currency is on the doorstep of another powerful decline, and not initiating a bull market run. The caption says it all – this is the time for antidollar plays to thrive in our era of ample credit, unprecedented money creation that‘s triggering a Roaring Twenties style of speculative environment, not a Kondratieff winter with a deflationary shock as you might hear some argue.Look around, check food, energy, or housing prices, and you‘ll see how connected to reality are the calls of those writing that inflation isn‘t a problem (monetary inflation lifting many asset classes). Check that against Fed President Daly stating that the inflationary pressures now point downwards… and make your own conclusions about the new money wave hitting the real economy.Gold, Silver and MinersJust as gold is challenging (resting on) the late Nov lows, so is the miners to gold ratio. That‘s a key one – I mentioned at the very end of Jan that I would like to see it start to lead higher. Seeing the latest two-day losing streak, it‘s not happening, and the late Jan breakdown which might have turned out to be false, may not materialize in the short run. Let‘s get a proper perspective by displaying this chart in weekly format.Is this the dreadful breakdown threating doom and gloom in the precious metals? Zooming out definitely provides a very different take – a more objective one than letting (fear) emotions run high and tickitis to take over.We‘re still consolidating, and not making lower lows – regardless of this week‘s increased gold sensitivity to rising yields as seen in the plunging TLT values. Inflation is making its way through the system as surely as Titanic‘s watertight compartments were filled with water. I‘ve discussed on Wednesday at length inflation, past Fed action and asset appreciation, and yesterday explained why the central bank will be tied into a war on two fronts as it gets to seek control over the yield curve at the long end too.Another short-term worrying chart as silver miners are caught in last days‘ selling whirlwind. Even the juniors lost their short-term edge over the seniors, making me think that a potential washout event before a more universal sectoral rebound, might be at hand.Pretty worrying for those who are all in gold – unless they took me up on last Friday‘s repeated idea that silver is going to outperform gold in the next precious metals upleg, which I formulated that day into a spread (arbitrage) trade long silver, short gold. Check out the following chart how that would have worked out for you.The dynamics favoring silver are unquestionable – starting from varied and growing industrial applications, strengthening manufacturing and economy recovery, poor outlook in silver above ground stockpile and recycling, to the white metal being also a monetary metal. Silver is bound to score better gains than gold, marred by the Bitcoin allure, would. SummaryThe bearish push in stocks didn‘t indeed take the sellers far – just as I wrote yesterday, there was no reason to hold on to your hat. The stock bull run is firmly entrenched, and there are no signals thus far pointing to an onset of a deeper correction right away as all we‘re going through, is a shallow correction (in time especially).Bearish dollar, $1.9T or similar stimulus not priced in, and yet gold isn‘t taking a dive. Amid very positive fundamentals, it‘s the technicals that are short-term challenging for gold – we‘re in truly unchartered territory given the economic policies pursued. I stand by my call to watch the TLT chart very closely – it looks like an orderly TLT decline is what gold needs, not a selling stampede. Despite the current disclocation with gold being the weakest of the weak (I am looking at commodities for cues), I still stand by the call that a new PMs upleg is only a question of time – a shortening one, at that.
Kiss of Life for Gold

Kiss of Life for Gold

Monica Kingsley Monica Kingsley 22.02.2021 16:24
The narrow trading range in stocks continues, and the shallow sideways correction will eventually resolve itself with another upleg. The signs are countless, and the riskier part of the credit market spectrum agrees. As money flows from the Tresury markets, and sizable cash balances are sitting on many a balance sheet, there is plenty of fuel to power the S&P 500 advance.With volatility in the tame low 20s and the put/call ratio again moving down, the bears‘ prospects are bleak. As I wrote last week, their time is running out, and a new stock market upleg approaches. It‘s the bond market that‘s under pressure, with both investment grade corporate bonds and long-dated Treasuries suffering in the accelerated decline.Gold is the most affected, as the sensitivity of its reaction to the rising long-tern yields, has picked up very noticeably. How long before these draw both the Fed‘s attention and action – what will we learn from Powell‘s testimony on Tue and Wed? And when will the much awaited stimulus finally arrive, and force repricing beyond the metals markets?Before that, gold remains on razor‘s edge, while silver leads and platinum flies for all the green hydrogen promise. The dollar has given back on Thu and Fri what it gained two days before, and remains in its bear market. Not even rising yields were able to generate much demand for the world reserve currency. Its lower prices stand to help gold thanks to the historically prevailing negative correlation, counterbalancing the Treasury yields pressure.Plenty of action that‘s bound to decide the coming weeks‘ shape in the precious metals. And not only there as oil experienced 2 days of lossess in a row – practically unheard of in 2021 so far. On Saturday, I‘ve added a new section to my site, Latest Highlight, for easier orientation in the milestone calls and timeless pieces beyond the S&P 500 and gold. Enjoy!Let‘s get right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe weekly indicators suggest that a reversal is still not likely. There is no conviction behind the weekly decline, and signs are still pointing to a sideways consolidation underway.The daily chart reflects the relatively uneventful trading – we‘re in a phase of bullish base building before powering off to new highs. See how little the daily indicators have retreated from their extended readings, and the barely noticeable price decline associated.S&P 500 InternalsAll the three market breadth indicators show improved readings, and my eyes are on new highs new lows throwing their weight behind the prior two indicators‘ advance. The overall impression is one of balance.The value to growth (VTV:QQQ) ratio shows that tech (XLK ETF) has fallen a bit out out of step recently – we‘re undergoing another microrotation into value stocks. The stock market leadership is thus broadening, confirming the findings from the advance-decline line (and advance-decline volume) examination.Credit MarketsOne chart to illustrate the bond market pressures – high yield corporate bonds are holding gained ground while investment grade corporate bonds and long-dated Treasuries are plunging like there is no tomorrow. With each of their rebound attempt sold, the dislocations are increasing – a great testament to the euphoric stage of the stock market advance. Gold and TreasuriesGold price action isn‘t as bearish as it might seem based on last week‘s moves. Yes, the readiness to decline in sympathy with rising yields, is diconcerting, but the yellow metal stopped practically at the late Nov lows, and refused to decline further. Low prices attracted buying interest, and due to the overwhelmingly negative sentiment for the week ahead, the yellow metal may surprise on the upside. Time for the bulls to prove themselves as the tone of coming weeks‘ trading in gold is in the balance.The daily chart‘s correlation coefficient has moved into strongly positive territory in 2021, illustrating the headwinds gold faces. Despite the prevailing wisdom, such strongly positive correlation isn‘t the rule over extended periods of time. That‘s the message of the daily chart – but let‘s step back and see the bigger picture similarly to the way I did on Friday witht the $HUI:$GOLD ratio.Not an encouraging sight at the moment. The tightness of mutual relationship is there, and given the decreased focus on timing (one candle representing one week) coupled with the correlation coefficient being calculated again over a 20 period sample, the week just over shows that regardless of the post-Nov resilience, gold is clearly getting under more pressure.Gold and DollarLet‘s do the same what I did about long-term Treasuries and gold, also about the dollar and gold. Their historically negative correlation is receding at the moment as the two face their own challenges. The key question is when and from what level would the fiat currency and its nemesis return to trading in the opposite directions. Such a time is highly likely to be conducive to higher gold prices.On the weekly chart, the negative correlation periods are winning out in length and frequency. Certainly given the less sensitive timining component through weekly candlesticks and 20-period calculation, the current strength and level of positive correlation is rather an exception and not a rule. Combining this chart‘s positive correlation between the two with the daily chart‘s negative yet rising readings, highlights in my view a potential for seeing an upset in the momentary relationship.In other words, the gold decline over the past now almost 7 months going hand in hand with mostly sliding dollar, would turn into higher gold prices accompanied by lower dollar values. How much higher gold prices, that depends on the long-term Treasuries market – that‘s the one playing the decisive role, not the dollar at the moment.Gold, Silver and MinersSilver is doing fine, platinum very well, while gold struggles and needs to prove itself. That‘s the essence of the long silver short gold trade idea – the silver to gold ratio attests to that.Quoting from Friday‘s analysis:(…) The dynamics favoring silver are unquestionable – starting from varied and growing industrial applications, strengthening manufacturing and economy recovery, poor outlook in silver above ground stockpile and recycling, to the white metal being also a monetary metal. Silver is bound to score better gains than gold, marred by the Bitcoin allure, would. Final chart of today‘s extensive analysis is about the two miners to gold ratios, and the divergencies they show. The ETF-based one (GDX:GLD) is sitting at support marked by both the late Nov and late Jan lows, while $HUI:$GOLD is probing to break below its late Jan lows, and these were already lower than the respective late Nov lows.Both ratios are sending a mixed picture, in line with the theme of my latest reports – gold is on razor‘s edge, and the technical picture is mixed given its latest weakness. That‘s the short run – I expect that once the Fed‘s hand is twisted enough in TLT and TLH, and speculation on yield curve control initiation rises, the focus in the precious metals would shift to inflation and its dynamics I‘ve described both on Wed and Fri. SummaryThe sellers in stocks aren‘t getting far these days, and signals remain aligned behind the S&P 500 advance to reassert itself. Neither the Russell 2000, nor emerging markets are flashing divergencies, and the path of least resistance in stocks remains higher.Gold‘s short-term conundrum continues - positive fundamentals that are going to turn even more so in the near future, yet the key charts show the king of metals under pressure, with long-term Treasury yields arguably holding the key to gold‘s short-term future. The decoupling events seen earlier this month, got a harsh reality check in the week just over. Yet, that‘s not a knock-out blow – the medium- and long-term outlook remains bright, and too many market players have rushed to the short side in the short run too.
FOMC Minutes Disappoint Gold Bulls

FOMC Minutes Disappoint Gold Bulls

Finance Press Release Finance Press Release 22.02.2021 17:26
The recent FOMC minutes are hawkish and negative for the price of gold, but the Fed will remain generally dovish for some time.Last week, the Federal Open Market Committee (FOMC) published minutes from its last meeting in January . They reveal that Fed officials became more optimistic about the economy than they were in December. The main reasons behind the more upbeat economic projection were the progress in vaccinations, the government’s stimulus provided by the Consolidated Appropriations Act 2021, and the expectations of an additional sizable tranche of fiscal support in the pipeline:Most participants expected that the stimulus provided by the passage of the CAA in December, the likelihood of additional fiscal support, and anticipated continued progress in vaccinations would lead to a sizable boost in economic activity.The Committee members were so convinced that the longer-run prospects for the economy had improved, that they decided to skip reference to the risks to the outlook in their official communications:in light of the expected progress on vaccinations and the change in the outlook for fiscal policy, the medium-term prospects for the economy had improved enough that members decided that the reference in previous post-meeting statements to risks to the economic outlook over the medium term was no longer warranted.Hence, the recent minutes are generally hawkish and bad for gold . They show that the FOMC participants turned out to be more optimistic about the U.S. economy over the medium-term, as they started to expect “strong growth in employment, driven by continued progress on vaccinations and an associated rebound of economic activity and of consumer and business confidence, as well as accommodative fiscal and monetary policy.”And, although they acknowledged that inflation may rise somewhat in 2021, the Fed officials generally were not concerned about strong upward pressure, with “most” participants still believing that inflation risks were weighted to the downside rather to the upside. In other words, they expect more growth than inflation.Implications for GoldThe Fed officials that have become more optimistic about the economy are proving negative for gold prices. Gold shines most when the Fed is pessimistic about GDP growth and the labor market, as these two factors are more prone to loosen the Fed’s monetary policy . In other words, gold prices need more inflation than economic growth in order to grow. Alternatively, gold needs the Fed to do something and expand its monetary accommodation.Indeed, the last week hasn’t been good for the price of the yellow metal. As the chart below shows, it declined below $1,800 to $1,773 on Thursday (Feb. 18), the lowest level since November 2020.Of course, the decline in the gold prices was more related to the significant selloff in the U.S. bond market than to the FOMC minutes. The bond yields increased sharply. For instance, the 10-year TIPS yields rose from -1.06 on February 10 to -0.87 on February 18, 2021, as one can see in the chart below.However, both events clearly show elevated expectations about the medium-term economic growth. Both investors and central bankers have become more optimistic about the future amid progress in vaccinations and greater prospects for additional fiscal stimulus. The strengthened risk appetite has supported equity prices, making some investors head for the exits in the gold market .Having said that, although gold prices still have some room to go lower – especially if real interest rates rally further – the fundamentals are still positive . I’m referring here to the fact that the U.S. economy has fallen into the debt trap . Both private and public debt is enormous. In such an environment, the interest rates cannot significantly increase, as they would pose a great risk to an overvalued equity market and Treasury. So, the Fed wouldn’t allow for really high interest rates and would intervene, either through expanding its quantitative easing program or through capping the yield curve .Another issue is that the Fed is not going to change its dovish monetary policy anytime soon. Even in the recent, relatively upbeat minutes, Fed officials acknowledged that economic conditions were far from the central banks’ targets:Participants observed that the economy was far from achieving the Committee’s broad-based and inclusive goal of maximum employment and that even with a brisk pace of improvement in the labor market, achieving this goal would take some time (…) Participants noted that economic conditions were currently far from the Committee’s longer-run goals and that the stance for policy would need to remain accommodative until those goals were achieved.Moreover, the Fed’s staff assessed the financial vulnerabilities of the U.S. financial system as being notable . The asset valuation pressures are elevated, and vulnerabilities associated with business and household debt increased over the course of 2020, from levels that were already elevated before the outbreak of the pandemic . So, given all these fragilities, it is unlikely that we will see a really hawkish Fed or significantly higher interest rates. There is also a possibility of the next financial crisis, given the high debt levels. All these factors should support gold prices in the long-term, although more declines in the short-term are possible of course, due to the more positive sentiment among investors and rising bond yields.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Bonds And Stimulus Are Driving Big Sector Trends And Shifting Capital

Bonds And Stimulus Are Driving Big Sector Trends And Shifting Capital

Chris Vermeulen Chris Vermeulen 25.02.2021 03:36
Falling Bonds and rising yields are creating a condition in the global markets where capital is shifting away from Technology, Communication Services and Discretionary stocks have suddenly fallen out of favor, and Financials, Energy, Real Estate, and Metals/Miners are gaining strength.  The rise in yields presents an opportunity for Banks and Lenders to profit from increased yield rates. In addition, historically low interest rates have pushed the Real Estate sector, including commodities towards new highs.  We also note Miners and Metals have shown strong support recently as the US Dollar and Bonds continue to collapse.  The way the markets are shifting right now is suggesting that we may be close to a technology peak, similar to the DOT COM peak, where capital rushes away from recently high-flying technology firms into other sectors (such as Banks, Financials, Real Estate, and Energy).The deep dive in Bonds and the US Dollar aligns with the research we conducted near the end of 2020, which suggested a market peak may set up in late February. We also suggested the markets may continue to trade in a sideways (rounded top) type of structure until late March or early April 2021.  Our tools and research help us to make these predictions nearly 4 to 5+ months before the markets attempt to make these moves.  You can read this research here:2021 MAY BE A GOOD YEAR FOR THE CANNABIS/MARIJUANA SECTORPRICE AMPLITUDE ARCS/GANN SUGGEST A MAJOR PEAK IN EARLY APRIL 2021 – PART IIWHAT TO EXPECT IN 2021 PART II – GOLD, SILVER, AND SPYIf our research is correct, we may have started a “capital shift” process in mid-February where declining Bonds, rising yields and the declining US Dollar push traders to re-evaluate continued profit potential in the hottest sectors over the past 6 to 12+ months.  This would mean that Technology, Healthcare, Comm Services and Discretionary sectors may suddenly find themselves on the “not so hot” list soon.Bonds Collapsing While Yields Continue To RiseThe following TLT Weekly chart highlights the extended downward trend taking place in Treasury Bonds.  This downside pricing pressure would usually support a rising stock market and moderately weaker precious metals.  But given the way the US Dollar is also declining, we are seeing fear become more of an issue as the high-flying stock market starts to look quite a bit over valued.  Rising yields also puts Financials and banking/lending near the top of the list for future profit potential.US Dollar Struggling To Find SupportThe Invesco US Dollar ETF, (UUP) Weekly below chart shows how weak the US Dollar has been after the COVID-19 price rotation.  The continued decline in price levels after May 2020 is a very clear indication that the US Dollar is reacting to the continued stimulus efforts as well as the decreased economic expectations.Be sure to sign up for our free market trend analysis and signals now so you don’t miss our next special report!Combined, the Bonds and US Dollar decline are raising the fear-factor among global investors and causing many to rethink where future growth and profits will originate.  Many are landing on the Financial and Energy sectors right now.Financial Sector Begins To Skyrocket HigherThe following Direxion Financial Bull 3x ETF (FAS) Weekly chart shows the incredible advance in the Financial Sector over the past 6+ months.  Almost like a sleepy rally, Financials have been rallying while traders have been focused on Technology, Healthcare and other sectors that seemed hot.  This shifting trend in sectors, and the associated shifting capital, suggests we may be nearing a tidal shift in sector trends – moving away from Technology and into Financials, Energy, Real Estate, and others.Volatility is still 2x to 3x what we have seen 4 to 5+ years ago.  This suggests any breakdown in trends could prompt a very volatile price correction/transition.  As sectors continue to shift, we urge traders to pay attention to the risks in the markets related to this elevated volatility which seems to be present in every sector. We believe we may be starting an extended “capital shift” process which may last well into March/April 2021 before real opportunities setup possibly in May or June.  The markets will do what they always do, react to traders, capital, and global central bank influence.  There are times when certain sectors enter a euphoric phase and there are times when the global markets revalue risk.  We may be nearing an end to a euphoric phase and starting a revaluation phase. This means many various sectors and symbols will present some very real opportunities for profits over the next few weeks and months.  Marijuana, Cryptos, Metals, Miners, Financials & Real Estate appear to be leading opportunities related to sector trends.  If these trends continue throughout 2021, we may see a revaluation/capital shift to propel these trends higher.Don’t miss the opportunities in the broad market sectors over the next 6+ months, which will be an incredible year for traders of the BAN strategy.  You can sign up now for my FREE webinar that teaches you how to find, enter, and profit from only those sectors that have the most strength and momentum. Learn how the BAN strategy can help you spot the best trade setups because staying ahead of sector trends is going to be key to success in volatile markets. For those who believe in the power of trading on relative strength, market cycles, and momentum but don’t have the time to do the research every day then my BAN Trader Pro newsletter service does all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers.Have a great rest of the week!
Gold & the USDX: Correlations

Gold Declines Despite Powell’s Easy Stance

Finance Press Release Finance Press Release 25.02.2021 18:13
Powell testified before Congress and reiterated the Fed’s dovish stance, but nevertheless, gold continued to slide.On Tuesday, Powell testified before the United States Senate Committee on Banking, Housing, and Urban Affairs. He offered no big surprises, so the markets were little changed. But the price of gold ended that day with a slight loss, as the chart below shows – perhaps just because Powell didn’t surprise, and struck a dovish tone.Anyway, what did the Fed Chair say? In his prepared remarks, Powell acknowledged the improved outlook for later this year . As I noted in the last edition of the Fundamental Gold Report about the recent FOMC minutes , a more optimistic Fed about the U.S. economy is bad news for gold.Additionally, Powell downplayed concerns about the recent rises in the bond yields (see the chart below), calling them “a statement of confidence” for an improving U.S. economic outlook, or “a robust and ultimately complete recovery”. This is also a negative comment for the yellow metal, as it would prefer the Fed reacting more aggressively to the increasing rates, and, for instance, implementing the yield curve control . The higher the yields, the worse it is for gold, which is a non-interest bearing asset.However, Powell also made some dovish comments . First of all, he reiterated that the Fed’s easy stance will last very long – longer than it used to be in the past . This is because the Fed implemented last year a new monetary framework, according to which the U.S. monetary policy will be informed by the assessments of shortfalls of employment from its maximum level, rather than by deviations from its maximum level. Moreover, the Fed will seek to achieve inflation that averages two percent over time. These changes imply that the Fed will not tighten monetary policy solely in response to a strong labor market, but only to an increase in inflation . However,But inflation must not merely reach two percent – it should rise moderately above two percent for some time in order to prompt the U.S. central bank to taper the quantitative easing and hike the federal funds rate .The second reason why the interest rates will stay lower for longer is that the economy is a long way from the Fed’s employment and inflation goals, and “it is likely to take some time for substantial further progress to be achieved”. On Wednesday, Powell acknowledged that it may take more than three years to reach these goals. This means that the Fed will treat any possible increases in inflation this year as temporary and will leave interest rates unchanged.Implications for GoldWhat does Powell’s testimony imply for the gold market? Well, gold bulls may be disappointed as the Fed Chair didn’t sound too dovish . He neither announced an expansion in the quantitative easing, nor the yield curve control, nor negative interest rates , nor a “whatever it takes” approach. And it seems that the yellow metal needs such things right now in order to survive – just like fish need water.However, the rising bond yields could become a problem at one point for the Fed. If they continue to rise, Uncle Sam will not be happy, and the Fed will have to step into the market to buy government bonds. The central bank and Treasury are good old friends and the close relationship between Powell and Yellen may only strengthen this beautiful friendship – and support gold prices.Moreover, the increasing bond yields (despite an ultra-dovish Fed) imply that reflation trade is strong. So far, investors just expect a return of inflation to a moderate level, but given the enormous surge in the broad money supply (see the chart below) and Biden’s mammoth fiscal plan, the risk of overheating is non-negligible.It would be really strange if such an aggressive monetary expansion wouldn’t affect the prices. As one can see, the growth in the M2 money supply is 2.5 times faster than during the Great Recession . Actually, we are already seeing inflation – but in the asset markets, not the CPI . The stock and house prices are surging. The commodity sector has also already been gaining and gold may follow suit .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Will There Be Roaring Twenties for Gold?

Will There Be Roaring Twenties for Gold?

Finance Press Release Finance Press Release 26.02.2021 16:59
The 2020s might be less roaring than the 1920s, which seems like good news for gold.The United States is strongly polarized, with blue versus red, liberals versus conservatives, and so on. People are divided along many lines, but the biggest division line is between those who count decades from 0 to 9 and those who count them from 1 to 10. It is intuitive for many people to adopt the first method, especially that we think of decades as ‘the 20s’, ‘the 30s’, and so on. However, the catch is that there was no Year Zero, so the first decade of the common era was years 1 to 10. Following this logic, the current decade started on January 1, 2021, not January 1, 2020.So, I feel fully entitled to investigate how gold will behave in the new decade. The issue is especially interesting as some analysts claim that we are entering the Roaring Twenties 2.0. Are they correct?On the surface, there are some similarities. The 1920s were a decade that followed the nightmare of World War I and the Spanish Flu pandemic . It was a time of quick economic growth (the U.S. GDP grew more than 40 percent in that period) and rapid technological innovation fueled predominantly by the rising access to electricity and big improvements in transportation (automobiles and planes).Fast forward one century and we land in the 2020s, which is a decade following the nightmare of the coronavirus pandemic . There are hopes for an acceleration in technological progress driven mainly by the rising scope of remote work, digital solutions, cloud computing, artificial intelligence, Internet of Things, 5G networks, robotization, super-batteries, electric vehicles, and so on. And given the pent-up demand and months spent in lockdowns, consumers are ready to congregate and spend!However, there are good reasons to be skeptical about the narrative of the Roaring Twenties 2.0 . The era of post-war prosperity was fueled by the return to the normalcy in the sphere of economic policy. I refer here to the fact that after WWI, there was a successful transition from a wartime economy to a peacetime economy. In contrast, in the aftermath of the Great Recession , there is a gradual transition from the peacetime economy to a wartime economy, that was only accelerated during the epidemic and the Great Lockdown .In particular, both the government spending and the fiscal deficits were sharply reduced in the post-war era. In consequence, the U.S. public debt declined, especially in real terms. Similarly, the Fed reversed its monetary policy and allowed for monetary contraction (and quick recession) in 1919-20 to reverse wartime inflation .In other words, the tighter monetary and fiscal policies led to an environment of economic prosperity. Also helpful for the U.S. were developments such as trustbusting and an economic recovery in Germany after its hyperinflation – all developments that will not replay in the 2020s.In contrast, neither the fiscal policy nor the monetary policy are going to normalize anytime soon , even if the COVID-19 pandemic is brought under control. The national debt has risen by almost $7.8 trillion under Trump’s presidency – a level that rivals Italy’s. The debt-to-GDP ratio has soared, as the chart below shows. And Joe Biden doesn’t worry about deficits – instead, with his plan of $1.9 trillion economic stimulus, he is going to balloon the public debt even further by increasing government spending.But maybe we shouldn’t worry about the debt? After all, after WW2, the public debt was even higher, but the economy didn’t collapse – actually, it grew so rapidly that the debt-to-GDP ratio diminished significantly. Yup, that’s correct, but after the pandemic, the economy will not recover as quickly as in the aftermath of WW2. Oh, and by the way, the economy grew its way out of debt only thanks to several years of high inflation .Therefore, the current complacency and naïve belief in low- interest rates and debt-driven economic recovery makes the scenario of the Roaring Twenties 2.0 not very likely, despite all the fantastic technological progress we are observing. So, instead of acceleration, we could rather observe an economic slowdown due to the poor economic policy that hampers the expansion of the private sector. Indeed, the recent report by the World Bank warns about the lost decade: “If history is any guide, unless there are substantial and effective reforms, the global economy is heading for a decade of disappointing growth outcomes.” This is good news for the gold market.But even if the Roaring Twenties 2.0 do happen, it wouldn’t have to be very bad for the yellow metal. It’s true that the 1920s was a period of wealth, prosperity, and decadence in which people didn’t think about preserving capital and investing in safe-haven assets such as gold . In contrast, there was a lot of risk-taking fueling the boom in the stock market. However, the Roaring Twenties were an inflationary period of debt-driven growth that ended in the systemic economic crisis called the Great Depression – and gold can shine in such an macroeconomic environment .Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Gold Continues Declines on Bond Yield Jitters

Gold Continues Declines on Bond Yield Jitters

Finance Press Release Finance Press Release 02.03.2021 16:30
The economy seems to be recovering, while bond yields are increasing again, sending gold prices down.Not good. Gold bulls can be truly upset. The yellow metal continued its bearish trend last week. As the chart below shows, the price of gold has declined from $1,807 on Monday (Feb. 22) to $1,743 on Friday (Feb. 26).What happened? Well, last week was full of positive economic news. In particular, personal income surged by 10 percent in January, compared to only 0.6-percent rise in the previous month. Meanwhile, consumer spending increased 2.4 percent, following a 0.4-percent decline in December. This means that, on an absolute basis, personal consumption expenditures have almost returned to the pre- pandemic level, as the chart below shows.Additionally, durable goods orders jumped by 3.4 percent in January versus a 1.2-percent increase one month earlier. Moreover, initial jobless claims declined from 841,000 to 730,000 in the week ending February 20, as the chart below shows. It means that the economic situation is improving, partially thanks to the December fiscal stimulus.And, on Saturday (Feb. 27), the House of Representatives passed Biden’s $1.9 trillion stimulus package. Although the bill has yet to be approved by the Senate, the move by the House brings us one step closer to its implementation. Although the additional fiscal stimulus may overheat the economy and turn out to be positive for gold prices in the long-term, the strengthened prospects of higher government expenditures can revive the optimism in the financial markets, negatively affecting the safe-haven assets such as gold .Finally, on Saturday, the FDA authorized Johnson & Johnson’s vaccine against COVID-19. This decision expands the availability of vaccines, which brings us closer to the end of the epidemic in the U.S. and offers hope for a faster economic recovery. The new vaccine is highly effective (it provides 85-percent protection against severe COVID-19 28 days after vaccination) and most importantly, requires only one dose, which facilitates efficient distribution. So, the approval of another vaccine is rather bad news for gold and could add to the metal’s problems in the near future.However, the most important development from the last week was the jump in the bond yields . As the chart below shows, after a short stabilization in the first half of the week, the yields on the 10-year Treasuries indexed by inflation rose from -0.79 to -0.60 percent on Thursday (Feb. 25). This surge in the real interest rates is negative for the price of gold.Implications for GoldWhat does this all mean for the price of gold? Well, the increase in the bond yields is clearly bad for the yellow metal. Although they have partially risen to strengthened inflation expectations, the real interest rates have also soared. It means that investors expect wider fiscal deficits and expanding vaccination to accelerate inflation only partially, but in a large part, it will speed up real economic growth. This is a huge problem for gold, as real interest rates are a key driver of gold prices.An additional issue is that the expectations of higher economic growth and inflation create accompanying expectations for the Fed to tighten its monetary policy and hike the federal funds rate , which exerts downward pressure on gold prices.This is what we were afraid of at the beginning of the year. We noted that the real interest rates were so low that the next move could be up. Importantly, there is further room for upward trajectory, as the real interest rates are still importantly below the pre-pandemic level.However, we wouldn’t bet on the return to the levels seen last year. After all, interest rates didn’t return to the pre-crisis level after the Great Recession , so it’s unlikely that they will do it now. Additionally, investors should remember that the U.S. government is now so heavily indebted that if Treasury yields continue to increase, the Fed would have to intervene. A failure to do so would mean that the interest expenses would grow too much, creating serious problems for the Treasury. So, the current bearish trend in gold may not last forever – although it may still take some time.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
What Correction in Stocks? And Gold?

What Correction in Stocks? And Gold?

Monica Kingsley Monica Kingsley 02.03.2021 16:30
Stocks thoroughly rebounded yesterday, and corporate credit markets did even better. These are optimistic signs as the shape of the correction has been decided – again, as shallow, less than 5% one. Long-termTreasuries are no longer in a free fall, volalility has retreated back to the low 20s, and the put/call ratio swung back towards the bottom of its recent range.Technology has rebounded as well, and the microrotations in the stock market keep being the haollmark of stock bull‘s health, and the risk-on (high beta) sectors and segments such as financials, semiconductors, or capex (capital expenditure such as construction and engineering) - and airlines are catching breath too.Such was the sectoral themes likely to do well that I mentioned yesterday:(…) That‘s the same about any high beta sector or stock such as financials – these tend to do well in rising rates environments. Regardless of any coming stabilization / retreat in long-term Treasury yields, it‘s my view that we‘re going to have to get used to rising spreads such as 2y over 10y as the long end still steepens. The markets and especially commodities aren‘t buying Fed‘s nonchalant attitude towards inflation. Stocks have felt the tremors, and will keep rising regardless, as it has been historically much higher rates that have caused serious issues (think 4% in 10y Treasuries).In such an environment, the defensives with low volatility and good earnings are getting left behind, as it‘s the top earners in growth, and very risk-on cyclicals that do best. They would be taking the baton from each other, as (micro)rotations mark the stock market bull health – and once tech big names join again, new highs would arrive. Then, the $1.9T stimulus has made it past the House, involves nice stimulus checks, and speculation about an upcoming infrastructure bill remains. Coupled with the avalanche of new Fed money, this is going into the real economy, not sitting on banks‘ balance sheets – and now, the banks will have more incentive to lend out. Margin debt isn‘t contracting, but global liquidity hasn‘t gone pretty much anywhere in February. Coupled with the short-term dollar moves, this is hurting emerging markets more than the U.S. - and based on the global liquidity metrics alone, the S&P 500 is oversold right now – that‘s without the stimulus package. It‘s my view that we‘re experiencing ... not a reversal of fortunes. … this remains one of the dips to be bought in my view.All right, we‘re seeing a rebound in progress, on the way to new highs – but what about the embattled gold? Its seasonality component was „slated“ to help the bulls in Feb, and the king of metals instead succumbed to nominal yields pressure. Would the Mar historically negative slant be likewise invalidated – and again precisely for the reason called long-dated Treasuries?Regardless of the immensely positive fundamentals behind the precious metals (including real rates, the true determinant, little changed and at -1%), it has thus far been commodities and Bitcoin who rose and held on to their gains since the 2H 2020. Please remember the big picture chart about commodities and precious metals taking turns in rising that I presented on Feb 17. The bullish case for gold (let alone silver) isn‘t lost – merely thoroughly questioned these weeks of sordid $HUI:$GOLD underperformance.Are we seeing signs of decreasing financial asset price inflation – or an accelerating one? It‘s the inflation and inflation expectations that are weighed against the nominal rates trajectory. As the rate of inflation accelerates, rising nominal rates would bite the yellow metal less – and there is no denying that the risk of inflation is running as high as can be.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookSo far, so (very) good in stocks – volume is lagging but the Force index still flipped positive, indication that at worst, we‘re likely to muddle through in a sideways to higher trading pattern over the nearest days.Credit MarketsAfter a worrying move on Friday, high yield corporate bonds (HYG ETF) are once again assuming leadership, and I see this chart as the one with more bullish implications for the coming days than the S&P 500 alone. That‘s the dynamic I am looking for in a good run.Both leading credit market ratios – high yield corporate bonds to short-dated Treasuries (HYG:SHY) and investment grade corporate bonds to longer-dated ones (LQD:IEI) – are looking to get back in closer sync than has been the case in 2021 thus far. It would take time, but would prove that the stock market can still keep on rising when faced with even higher nominal rates than we saw thus far.TechnologyTechnology (XLK ETF) clearly reversed, and while the volume isn‘t convincing on a standalone basis, coupled with semiconductors (XSD ETF) and other value stocks performance, it‘s encouraging enough to treat any significant correction calls heard elsewhere, as again plain wrong and premature, for the full picture view didn‘t support such calls in the first place, and you know what is being said about every broken clock being right twice a day…Having said so, let‘s turn to precious metals, which offered more than a few bullish signs way earlier in Feb. Based on the evolving charts and gold‘s failure to gain credible traction, I was at least able to time most of the downside before it happened – such as last week. Still, there has been little bullish that could be said about the PMs complex, as encouraging signs emerged only to be gone shortly. So, where do we stand at the moment?Gold and Copper to Oil RatioRising TLT rates are turning a corner, but the yellow metal is staying at the strong volume profile support zone that marks the April-May consolidation zone. Earlier today, gold cut all the way to its lower end (that‘s low $1,700s) before rebounding. The danger zone hasn‘t been cleared in the least yet, but the signs of silver reversing once again from a double test of $26, is as encouraging as copper rising again, and oil not tanking.The copper to oil ratio whose long-term perspective I featured yesterday, is making a clear turn on the daily chart. Coupled with the TLT stabilization, and the dollar trading with relatively little correlation to gold these days, the table is set for a short-term rebound in the metals. How far would these take the sector? The numerous bears would have you believe that not too far & that another downleg to ridiculously low values is at hand, but I am not convinced and prefer reading the tape instead. Yes, even in the mostly bearish PMs chart setups where nothing bullish has stuck for longer than several day over the past weeks. I repeat that the $1.9T stimulus bill (and infrastructure bill, even slavery reparations if we get that far really) hasn‘t been truly factored in by the markets – and yesterday‘s S&P 500 action proves that.Silver and MinersSilver keeps consolidating in a bullish pattern well above $26 still (not that it would be the line in the sand though), and when the silver miners (SIL ETF) start leading again, a new silver upleg would be born. For now, these are still mirroring the weak gold miners‘ performance, which is free from bullish signals for the yellow metal still. The gold sector isn‘t yet ready to run, plain and simple.SummaryStock bulls are on a solid recovery path, and new all time highs are again closer in sight. Crucially, the corporate credit markets and S&P 500 sectoral performance confirm, and once emerging markets join (the dollar weakens again), more fuel to the rally would be available.Gold remains precariously perched, yet isn‘t breaking down – the bull run off last spring‘s consolidation remains intact – regardless of the short-term gloom and doom. I see the metals as likely to recover next as the Treasury yields stop biting. Restating the obvious, gold is far from out of the woods.
Mixed Start for Stocks in March

Mixed Start for Stocks in March

Finance Press Release Finance Press Release 03.03.2021 15:08
After March kicked off with a session that indicated the worst for stocks may be over (for now), Tuesday saw the indices sell-off towards the close.At least Rocket Mortgage (RKT) had a good day, though! And, at least the 10-year yield didn’t spike either. But that could change. Yields ticked up overnight to 1.433%, after President Biden pledged enough vaccine supply to inoculate every American adult by the end of May.So, where do we go from here? This positive economic and health news is excellent for reopening. But rising bond yields are a blessing and a curse. On the one hand, bond investors see the economy reopening and heating up. On the other hand, with the Fed expected to let the GDP scorch without hiking rates, inflation may return.I don’t care what Chairman Powell says about inflation targets this and that. The price of gas and food is increasing already. In fact, according to Bloomberg, food prices are soaring faster than inflation and incomes.For January, Consumer Price Index data also found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in the prices of all goods included in the CPI.Can you imagine what this was like for February? Can you imagine what it will be like for March? I’m not trying to sound the alarm - but be very aware. These are just the early warning signs.So about March. Will it be more like Monday or Tuesday? Was the second half of February the start of the correction that I’ve been calling for? Or is the “downturn” already over? Only time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels are in motion for a healthy 2021, I still maintain that some correction before the end of this month could happen.Rising bond yields are concerning. Inflation signs are there. But structurally, I don’t think it will crash the market (yet).Corrections are also healthy and normal market behavior, and we are long overdue for one. It’s been almost a year now. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).A correction could also be an excellent buying opportunity for what could be a great second half of the year.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:There is optimism but signs of concern. A further downturn by the end of the month is very possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Nasdaq- a Buyable Slowdown?Figure 1- Nasdaq Composite Index $COMPThe Nasdaq’s slowdown has been long overdue. Even though more pain could be on the horizon, I like the Nasdaq at this level for some buying opportunities.But I’d prefer it drop below support at 13000 for real buying opportunities.But it can’t hurt to start nibbling now. If you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.Plus, it’s safe to say that Cathie Wood, the guru of the ARK ETFs, is the best growth stock picker of our generation. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler seems to think so too. Her ETFs, which have continuously outperformed, focus on the most innovative and disruptive tech companies out there. Not to put a lot of stock in one person. But it’s safe to say she knows a thing or two about tech stocks and when to initiate positions- and she did a lot of buying the last few weeks.I also remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.Before February 12, I would always discuss the Nasdaq’s RSI and recommend watching out if it exceeds 70.Now? As tracked by the Invesco QQQ ETF , the Nasdaq has plummeted almost 5.5% since February 12 and is closer to oversold than overbought!But it’s still not enough.Outside of the Russell 2000, the Nasdaq has been consistently the most overheated index. But after its recent slowdown, I feel more confident in the Nasdaq as a SHORT-TERM BUY.The RSI is king for the Nasdaq . Its RSI is now around 45.I follow the RSI for the Nasdaq religiously because the index is merely trading in a precise pattern.In the past few months, when the Nasdaq has exceeded an overbought 70 RSI, it has consistently sold off.December 9- exceeded an RSI of 70 and briefly pulled back.January 4- exceeded a 70 RSI just before the new year and declined 1.47%.January 11- declined by 1.45% after exceeding a 70 RSI.Week of January 25- exceeded an RSI of over 73 before the week and declined 4.13% for the week.Again- if the index drops below 13000, and the RSI hits undeniably overbought levels, get on the train.But because we haven’t declined just enough, I am making this a SHORT-TERM BUY. But follow the RSI literally and take profits once you have the chance to.For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Weak Jobs Data, Stocks and Gold

Weak Jobs Data, Stocks and Gold

Monica Kingsley Monica Kingsley 03.03.2021 16:19
Stocks gave up some of Monday‘s strong gains, but I find it little concerning in the sub-3,900 pre-breakout meandering. It‘s about time, and a play on the tech sector to participate meaningfully in the coming rally (or at least not to stand in the way again). Talking obstacles, what about today‘s non-farm employment change, before the really key Fri‘s release? A bad number makes it less likely for market participants to bet on the Fed raising rates soon – but frankly, I don‘t understand where this hawkish sentiment is coming from, now when we‘re not at even talking taper. Raising rates in the current shape of the recovery, where we have commodities and financial asset prices rising, and that‘s about it? No, the current economic recovery isn‘t strong enough to entertain that thought. The need for stimulus asap is obvious. Thus, prior trends in the commodities and currency arenas are likely to continue, and not even the current long-term Treasuries stabilization can prevent the greenback from falling more than temporarily.Just as I wrote yesterday about stocks:(…) All right, we‘re seeing a rebound in progress, on the way to new highs.Gold scored modest gains yesterday, but these aren‘t enough to flip its short-term outlook bullish. Yes, it‘s sitting within the strong support zone (with another one over $40 further lower), and it isn‘t breaking down. It could actually stage a rebound precisely off this support zone next, as sharp rallies are born during the opposite sentiment clearly prevailing, which is what we have in gold now.Silver remains relatively solid, and commodities aren‘t breaking down. We have a month historically strong for copper, and I talked both yesterday and Monday what that means for the copper to oil ratio – and its relationship to gold, given the very accomodative monetary policy without real end in sight. This is then checked against nominal rates matching up against inflation, inflation expectations.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsYesterday‘s downswing didn‘t attract much volume, making it a short-term hesitation That‘s the meandering, the search for direction just below the 3,900 mark that I had been tweeting about yesterday. If you look at the equal weighted S&P 500 chart (RSP ETF), it‘s clear that new highs are still a little off given the sectoral balance of power.The market breadth indicators reflect the daily indecisiveness fittingly. While not worrying in themselves, they‘re showing that Monday‘s session wasn‘t the beginning of an endless bullish streak. Rather, it‘s just a part of the bullish turn that would over time prevail more convincingly.Credit MarketsThe key leading credit market ratio – high yield corporate bonds to short-dated Treasuries (HYG:SHY) – is slightly leaning bullish here. And that‘s good given the talk of bubble bursting, significant correction just ahead (started) – that‘s what I am looking for in uncertain times. Ideally though, such a bond market leadership should last a bit longer than one day, to lend it more credibility.TechnologyTechnology (XLK ETF) once again reversed to the downside, or so the chart says. While high, the volume isn‘t trustworthy – it doesn‘t stand comparison to the visually similar early Sep pattern, which was followed by a break to new lows in the latter half of the month. Then, as the overlaid S&P 500 (black line) shows, high beta pockets and value sectors have assumed leadership, powering the S&P 500 advance.DollarThe USD index is keeping close to the 91 mark, and yesterday‘s candle reveals that the potential upside isn‘t probably all that great. This is consistent with the dollar being in a bear market, sliding to new lows in 2021 with likelihood bordering on certainty. Plain and simple, it‘ll be on the defensive regardless of where long-term rates go.Gold and SilverGold had a good chance to rebound higher throughout this week, but didn‘t – given its Monday‘s performance, I had some reservations even as the support zone held, and upswing could easily follow – especially given the positive copper to oil ratio‘s move, or TLT not putting fresh pressure. But that‘s not happening in today‘s pre-market session, as the support‘s lower border is being tested again.Silver keeps holding the $26 level, and still trades at the 50-day moving average. While it‘s lagging behind both platinum and copper, its chart is (unlike gold‘s) bullish. Remember, the most bullish thing prices can do, is to rise. Not to rebound and fizzle out, only to rebound and fizzle out again, the way we see in gold as it keeps offering both bearish and bullish signs.OilOil keeps trading in a bullish fashion, and the 3-day long correction hasn‘t broken even Feb local lows yet. While we‘re for increased volatility in here, the uptrend remains strong, and volume currently doesn‘t support a deep correction theory. Just look how little have the retreating daily indicators achieved when it comes to the underlying price move? That‘s a reflection of a strong uptrend, which would be however best advised to resume sooner rather than later so as not to lose the technical advantage.SummaryStock bulls are on a recovery path, and new all time highs are basically a question of when the tech would step up to the plate again. Despite today‘s premarket weakness reaching well below the 3,870 level, the S&P 500 internals and credit markets performance (including foreign bonds) doesn‘t indicate that much downside potential currently. This correction‘s shape is largely in, and I mean the price downside – patience though will be needed before seeing new highs.Gold remains stuck in its support zone, unable to rally, not breaking down. The copper advantage of yesterday is lost for today, but seeing it and silver recover would be the most likely outcome once the immediate threat of rising Treasury yields retreats more noticeably. Gold is far from out of the woods, and flirting with the support level without a convincing rebound, is dangerous to the bulls.
Are S&P 500 and Precious Metals Bears Just Getting Started?

Are S&P 500 and Precious Metals Bears Just Getting Started?

Monica Kingsley Monica Kingsley 04.03.2021 16:19
Scary selling yesterday? See how little the downswing has achieved technically, check out the other characteristics, and you‘ll probably reach the same conclusion I did. It‘s still about the tech getting its act together while much of the rest of the market is doing quite fine.The credit market confirm, as is obvious from the HYG:SHY ratio chart I‘m showing you. True, long-term Treasuries are under pressure, but I wrote on Monday that not even considerably higher rates would break the bulls‘ back. The dollar isn‘t getting far, and given tomorrow‘s non-farm payrolls, which are expected to be rather bad… Check instead another chart I am featuring today, and that‘s volatility – this correction appears in its latter stages as the crash callers „now, this quarter, whenever because it‘s allegedly overdue“, will be again surprised and backtracking in tone once the market gets what it wants: more liquidity.That was stocks, what about gold? No shortage of gloomy charts there, accompanied by various calls for a local bottom. The most bullish one (me included, talks about a possible bottom being made here, with the $1,700 to $1,690 zone able to stop the downside. I am though also raising the lower border of the Apr-May 2020 consolidation, which is around $1,670, as an even stronger support (over $40 lower than the above one) than the volume profile based one we‘re still at currently – and based on different tools, I am far from alone. The doomsayers‘ scary clickbaitish targets of $1,500 or $1,350 are in the minority, and about as helpful as calls for $100 silver before years‘ end. As I always say, let‘s be realistic, honest, and act with real integrity. People deserve better than to be played around through fear or greed.Silver remains in a solid uptrend, and so does platinum. Regardless of today‘s premarket downswing taking copper over 4% down as we speak, commodities are happily running higher in the face of „no inflation here, move along“ calls. How far is the Fed announcing yield curve control, or at least a twist program? Markets crave more intervention, and those calling for rate hikes to materialize soon, are landing with egg on their faces – mark my words, the Fed is going to stay accommodative longer than generally anticipated – have we learned nothing from the Yellen Fed?Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsYesterday‘s downswing didn‘t attract outstanding volume, and didn‘t overcome Fri‘s one. Regardless of the visit to the lower border of recent trading range, the bears would have to become more active to flip this chart bearish really.Credit MarketsThe key leading credit market ratio – high yield corporate bonds to short-dated Treasuries (HYG:SHY) – hasn‘t really broken down yesterday. Just a consolidation that has an inverse head and shoulders shape on top. Of course, until the neckline is broken, there are no bullish implications, but I am looking for higher HYG:SHY values regardless.VolatilityYesterday‘s volatility – and put/call readings too – are very tame, and that detracts from the credibility of a significant downswing starting here considerably.TechnologyTechnology (XLK ETF) compared to the value stocks (VTV ETF) shows clearly once again the performance difference – tech still taking time and basing, while value sectors and high-beta segments keep doing largely fine. This view isn‘t one that‘s associated with the onset of real corrections – but with waiting for the tech to start behaving for new highs to be attainable once again.Gold and SilverGold still has a good chance to rebound higher, even though it missed yesterday‘s opportunity that would have resulted in a nice hammer candlestick. Nevermind, we have to live with what we have – and the support is still unbroken, not ruling out an upswing in the least. Yes, regardless of the deeply negative Force index which really wasted each prior opportunity to turn positive this winter. The metals would do well to get used to living with higher nominal rates really, when the real rates are little changed. Silver keeps doing much better, which is little surprising given the economic recovery, leading indicators not weakening, manufacturing activity doing fine – it‘s a versatile metal, both industrial and monetary after all. Compare how little has its Force index declined vs. gold – this is rather a bullish chart, unlike gold still searching for direction (i.e. without an established uptrend).CopperLet‘s compare the red metal (perched high, digesting steep Feb gains) to platinum and silver. I‘m featuring copper as the key determinant for precious metals, also given the positive Mar seasonality. The above chart fittingly illustrates the bull market‘s strength – and the waiting on gold to join.SummaryStock bulls have to once again take the trip to the 3,900 mark, and when that happens, depends on the tech the most. The S&P 500 internals and credit market performance remains sound, and new highs are a question of time (and stimulus).Gold remains stuck in its support zone, unable to rally, not breaking down. While copper is retreating today, the technical odds favor a rebound off this support. Once that happens, it would be though still too early to call for the new gold bull upleg to resume – much more would need to happen, such as the miners doing really well, and so on. But we‘ll get there.
Gold & the USDX: Correlations

Gold Approaches $1,700 on Rising Economic Confidence

Finance Press Release Finance Press Release 04.03.2021 16:39
Gold remains in a bearish trend as economic confidence has improved, however, inflation can change all that around.The chart presenting gold prices in 2021 doesn’t look too encouraging. The yellow metal continued its bearish trend at the turn of February and March. So, as one can see, the price of gold has declined from $1,943 on January 4 to $1,711 on Wednesday (Mar. 3) This means a drop of 232 bucks, or 12 percent since the beginning of the year.What is happening in the gold market? I would like to blame the jittering bond market and increasing bond yields , but the uncomfortable truth is that the yellow metal has slid in the past few days despite the downward correction in the bond yields. If you don’t believe, take a look at the chart below. This is an important bearish signal, given how closely gold is usually linked to the real interest rates .So, it seems that there are more factors at work than just the bond yields. One of them is the recent modest strengthening of the greenback , probably amid rising U.S. interest rates and ECB officials’ remarks about possible expansion of the ECB’s accommodative stance if the selloff in the bond market continues.Another piece of bearish news for the gold market is that President Joe Biden struck a last-minute stimulus deal with Democratic Senators that narrows the income eligibility for the next round of $1,400 stimulus checks. It means that the upcoming fiscal stimulus will be lower than previously expected, negatively affecting inflation expectations and, thus, the demand for gold as an inflation hedge .Lastly, I have to mention the high level of confidence in the economy. Indeed, the recent rise in the bond yields may just be a sign of more optimism about the economic recovery from the pandemic recession . Hence, despite all the economic problems the U.S. will have to face – mainly the huge indebtedness or actually the debt-trap – investors have decided to not pay too much attention to the elephants in the room. As the chart below shows, the credit spread (ICE BofA US High Yield Index Option-Adjusted Spread), which is a useful measure of economic confidence, has returned to the pre-pandemic level, indicating a strong belief in the state of the economy. This is, of course, bad for safe-haven assets such as gold.Implications for GoldWhat does this all mean for gold prices? Well, from the long-term perspective, the recent slide to almost $1,700 could just be noise in the marketplace. But gold’s disappointing performance is really disturbing given the seemingly perfect environment for the precious metals . After all, we live in a world of negative interest rates , a weak U.S. dollar, rising fiscal deficits and public debt , soaring money supply and unprecedented dovish monetary and fiscal policies . So, the bearish trend may be more lasting, as market sentiment is still negative. Investors usually turn to gold, a great portfolio diversifier and a safe haven , when other investment are falling. But the worst is already behind us, the economy has already bottomed out, so confidence in the economy is now high, and equities are rising.Having said that, the recent jump in the bond yields also means rising inflation expectations . Indeed, as the chart below shows, they have already surpassed the levels seen before the outbreak of the pandemic .Actually, the 5-year breakeven inflation rate has reached 2.45 percent, the highest level since the midst of the Great Recession . So, in some part, investors are selling bonds, as they are preparing for an reflation environment marked by higher inflation . At some point, if the fear of inflation strengthens, then economic confidence will waver, and investors could again turn toward gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Correction for Nasdaq- More Indices to Follow?

Correction for Nasdaq- More Indices to Follow?

Finance Press Release Finance Press Release 05.03.2021 15:31
I called Jay Powell's bluff a week ago. Remember when he said last week that we're still far from The Fed's inflation targets?Well, I was right to doubt him. The market didn't like his change in tone Thursday (Mar. 5).You see, when bond yields are rising as fast as they have, and Powell is maintaining that Fed policy won't change while admitting that inflation may " return temporarily ," how are investors supposed to react? On the surface, this may not sound like a big deal. But there are six things to consider here:It's a significant backtrack from saying that inflation isn't a concern. By admitting that inflation "could" return temporarily, that's giving credence to the fact that it's inevitable.The Fed can't expect to let the GDP scorch without hiking rates. If inflation "temporarily returns," who is to say that rates won't hike sooner than anyone imagines?Fool me once, shame on me, fool me twice...you know the rest. If Powell changed his tune now about inflation, what will he do a few weeks or months from now when it really becomes an issue?Does Jay Powell know what he's doing, and does he have control of the bond market?A reopening economy is a blessing and a curse. It's a blessing for value plays and cyclicals that were crushed during COVID and a curse for high-flying tech names who benefitted from "stay-at-home" and low-interest rates.The Senate will be debating President Biden’s $1.9 trillion stimulus plan. If this passes, as I assume it will, could it actually be worse for the economy than better? Could markets sell-off rather than surge? Once this passes, inflation is all but a formality.Look, it's not the fact that bond yields are rising that are freaking out investors. Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%. But it's the speed at which they've risen that are terrifying people.According to Bloomberg , the price of gas and food already appear to be getting a head start on inflation. For January, Consumer Price Index data also found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in all goods included in the CPI.The month of January. Can you imagine what this was like for February? Can you imagine what it will be like for March?I'm not trying to sound the alarm- but be very aware. These are just the early warning signs.So, where do we go from here? Time will tell. While I still do not foresee a crash like we saw last March and feel that the wheels remain in motion for a healthy 2021, that correction that I've been calling for has already started for the Nasdaq. Other indices could potentially follow.Finally.Corrections are healthy and normal market behavior, and we have been long overdue for one. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).Most importantly, this correction could be an excellent buying opportunity.It can be a very tricky time for investors right now. But never, ever, trade with emotion. Buy low, sell high, and be a little bit contrarian. There could be some more short-term pain, yes. But if you sat out last March when others bought, you are probably very disappointed in yourself. Be careful, but be a little bold right now too.There's always a bull market somewhere, and valuations, while still somewhat frothy, are at much more buyable levels now.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:There is optimism but signs of concern. A further downturn by the end of the month is very possible, but I don't think that a decline above ~20%, leading to a bear market, will happen.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Nasdaq- From Overbought to Oversold in 3 Weeks?Figure 1- Nasdaq Composite Index $COMPThe Nasdaq is finally in correction territory! I have been waiting for this. It’s been long overdue and valuations, while still frothy, are much more buyable. While more pain could be on the horizon until we get some clarity on this bond market and inflation, its drop below 13000 is certainly buyable.The Nasdaq has also given up its gains for 2021, its RSI is nearly oversold at about 35, and we’re almost at a 2-month low.It can’t hurt to start nibbling now. There could be some more short-term pain, but if you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.Plus, it’s safe to say that Cathie Wood, the guru of the ARK ETFs, is the best growth stock picker of our generation. Bloomberg News ’ editor-in-chief emeritus Matthew A. Winkler seems to think so too. Her ETFs, which have continuously outperformed, focus on the most innovative and disruptive tech companies out there. Not to put a lot of stock in one person. But it’s safe to say she knows a thing or two about tech stocks and when to initiate positions- and she did a lot of buying the last few weeks.I think the key here is to “selectively buy.” I remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.I also think it’s an outstanding buying opportunity for big tech companies with proven businesses and solid balance sheets. Take Apple (AAPL), for example. It’s about 30% off its all-time highs. That is what I call discount shopping.What’s also crazy is the Nasdaq went from overbought 3 weeks ago to nearly oversold this week. The Nasdaq has been trading in a clear RSI-based pattern, and we’re at a very buyable level right now.I like the levels we’re at, and despite the possibility of more losses in the short-run, it’s a good time to start to BUY. But just be mindful of the RSI, and don’t buy risky assets. Find emerging tech sectors or high-quality companies trading at a discount.For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.For more of my thoughts on the market, such as the streaky S&P, inflation, and emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Stimulus And Consumers Are The Keys To Further US/Global Economic Recovery – Part I

Stimulus And Consumers Are The Keys To Further US/Global Economic Recovery – Part I

Chris Vermeulen Chris Vermeulen 08.03.2021 03:55
At this point in our lives, we are hoping the new COVID-19 vaccines will do their part to help move the world towards more normal consumer and economic activities.  The US Senate recently a new $1.9 Trillion stimulus package that should continue to provide assistance to various levels of consumer, state governments, and corporate enterprises.  The next question in our mind is “what will the recovery look like if/when it happens?”.  We need to look at three critical components of the global economy to help answer this question: Consumer Activity, Debt, and Supply/Demand Functions.Consumer activity makes up more than 60% of the US GDP.  It also drives money flow as consumers engage in economic activity, create credit for new purchases and help to balance the supply/demand equilibrium functioning properly.  The participation of the consumer within an economy is essential for a healthy growing economy.WHERE ARE CONSUMERS NOW & WHERE WILL THEY BE IN THE FUTURE?The US has passed more than $4 Trillion in COVID-19 stimulus over the past 12+ months.  At the same time, global central banks have also engaged in various easy money policies to spark global economic activity.  When we combine the efforts of world governments and central banks, we've seen an unprecedented amount of money deployed throughout the globe recently – and that money needs to find its purpose and use in the global economy quickly of the global economy is going to recover enough to spark a new wave of economic growth.We believe two key components of consumer engagement are at play right now; investing/trading in the US and global markets and Real Estate.  Whereas US consumers have been reducing debt exposure on credit cards and tightening their spending in other ways, trading volumes in the stock market Indexes and ETFs have increased dramatically over the past 12 months.  Additionally, low supply and low interest rates have kept the US housing market active, in addition to the boost in activity from people moving to more rural areas as the work-from-home phenomenon settles into the new normal.CASE-SHILLER HOME PRICE INDEXThis Case-Shiller 20-City Composite Home Price Index chart, below shows how quickly home prices have rallied over the past 12 months. Just prior to the COVID-19 pandemic, this index was flattening.  Then the moratorium on foreclosures and extended assistance for homeowners pulled many homes back off the market in early 2020.  That reduced supply and prompted a rally in home prices across the US.The assistance provided to these “at-risk” homeowners accomplished two very important economic benefits.  It eliminated a wave of new foreclosures (albeit possibly temporarily) and it prompted a seller's market because supply had been constricted.  The result is that many homeowners witnessed a 6% to 10% increase in their home values over the last 12+ months.DELINQUENCY RATES ON CONSUMER LOANSUnlike in 2006-2008 when delinquency rates skyrocketed during the housing crisis, throughout the COVID-19 pandemic, delinquency rates collapsed to the lowest levels over the past 25+ years.  Consumers took their extra capital, stimulus checks, and federal assistance and used the past 12+ months to eliminate certain debts.  Even though we are starting to see an uptick in delinquency rates in Q4 2020, these levels would have to climb considerably before we get close to the levels before the COVID-19 pandemic.Be sure to sign up for our free market trend analysis and signals now so you don’t miss our next special report!This suggests that a broad spectrum of US consumers are in a much better economic position related to revolving debt, or credit card debt, than they were before the COVID-19 pandemic.  If these consumers begin to engage in a new economic recovery by engaging in a healthy credit expansion, we may see a boost to certain sectors of the economy over the next 24 to 36+ months.REAL PERSONAL CONSUMPTION EXPENDITURESUnlike many other indicators, Real Personal Consumption has risen past the pre-COVID-19 peak levels.  This suggests that consumers are still spending money on Durable Goods and are continuing to buy essential items to support their lifestyles and families.  Yes, there are a number of people that are unemployed or have transitioned to other types of work, but the stimulus efforts and extended unemployment assistance has translated into real consumer engagement for Durable Goods, as we can see from the chart below.Remember, Durable Goods are not typically found at Grocery Stores or Walmart.  They are items that have extended life-cycles (greater than three years); such as cars, planes, trains, furniture, appliances, jewelry, and books.  This rise in Durable Goods suggests that a large segment of the US consumer is actively engaged in making bigger-ticket purchases recently – possibly as a result of buying a new home, transitioning away from traditional work environments, and/or repositioning family essentials in preparation for a post COVID-19 world.  This type of economic engagement may continue for many months forward.CONSUMER PRICE INDEX – ALL URBAN CONSUMERSThe following Consumer Price Index chart shows that general consumer prices briefly dipped when COVID-19 hit in March 2020, but they have since rallied to new highs.  This is partially a result of the rise in home prices and rising commodity prices, which contribute to a rise in price levels for consumers.All of this data is showing that the US consumer is actually much more economically healthy than consumers were in the midst of the 2007-08 housing crisis. The stimulus efforts and partial economic shutdown did result in a large number of displaced or disadvantaged consumers, but it also shows that many US consumers were able to quickly transition into a different type of economic environment with very little extended economic risks.The new $1.9 Trillion stimulus package will offer even more assistance to consumers.  This new stimulus will be spent as new COVID-19 vaccines are being rolled out, suggesting the US is quickly moving away from extended risks related to the pandemic.  This means consumers will likely start attempting to go back to normal in certain ways.  Does this mean that the recovery efforts will strengthen the bullish price trend in the future and the US stock markets will continue to rally?In our effort to better identify opportunities for traders and investors as the post-COVID-19 recovery unfolds, we will continue to identify various market sectors that my research team and I believe have a strong potential for increased bullish price trends.  All of the data we've presented so far suggests the US consumer is much healthier than many people consider and that many US consumers are still actively engaged in some type of work/income solution.  The only reason why housing, durable goods, CPI, and other economic indicators continue to rise is because US consumers are actively engaged in buying/consuming bigger, durable goods.  This suggests the new $1.9 Trillion COVID relief effort may begin to push the US economy further into overdrive, and possibly pushing the supply/demand balance even further beyond the equilibrium zone.Don’t miss the opportunities to profit from the broad market sector rotations we expect this year, which will be an incredible year for traders of my Best Asset Now (BAN) strategy.  You can sign up now for my FREE webinar that teaches you how to find, enter, and profit from only those sectors that have the most strength and momentum. Staying ahead of sector trends is going to be key to success in volatile markets.For those who believe in the power of trading sectors that show relative strength and momentum but don’t have the time to do the research every day, let my BAN Trader Pro newsletter service do all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my BAN Trader Pro subscribers.In Part II of this article, we'll take the data we've reviewed already and apply it to current market conditions, trends, and technical setups as we look for new opportunities in consumer-based sectors.  My team and I believe some very big sector trends are going to set up as a result of everything that is converging on the US and global markets.  It's time to get ready for some big trends. 
No More Rocking the Boat in Stocks But Gold?

No More Rocking the Boat in Stocks But Gold?

Monica Kingsley Monica Kingsley 08.03.2021 15:23
Stocks sharply reversed intraday, and closed just where they opened the prior Friday. That indicates quite some pressures, quite some searching for direction in this correction that isn‘t over just yet. Stocks have had a great run over the past 4 months, getting a bit ahead of themselves in some aspects such as valuations. Then, grappling with the rising long-term rates did strike.So did inflation fears, especially when looking at commodities. Inflation expectations are rising, but not galloping yet. What to make of the rising rates then? They‘re up for all the good reasons – the economy is growing strongly after the Q4 corona restrictions (I actually expect not the conservative 5% Q1 GDP growth, but over 8% at least) while inflation expectations are lagging behind. In other words, the reflation (of economic growth) is working and hasn‘t turned into inflation (rising or roughly stable inflation expectations while the economy‘s growth is slowing down). We‘re more than a few quarters from that – I fully expect really biting inflation (supported by overheating in the job market) to be an 2022-3 affair. As regards S&P 500 sectors, would you really expect financials and energy do as greatly as they do if the prospects were darkening?So, I am looking for stocks to do rather well as they are absorbing the rising nominal rates. It‘s also about the pace of such move, which has been extraordinary, and left long-term Treasuries trading historically very extended compared to their 50-day moving averages. Thus, they‘re prone to a quick snapback rally over the next 1-2 weeks, which would help the S&P 500 regain even stronger footing. And even plain temporary stabilization of theirs would do the trick.This is taking me directly to gold. We have good odds of long-term rates not pressuring the yellow metal as much as recently, and inflation expectations are also rising (not as well anchored to 2% as the Fed thinks / says). As I‘ll show you in the charts, the signs of decoupling have been already visible for some time, and now became more apparent. And that‘s far from the only suggestion of an upcoming gold upswing that I‘ll bring you today.Just as I was calling out gold as overheated in Aug 2020 and prone to a real soft patch, some signs of internal strength in the precious metals sector were present this Feb already. And now as we have been testing for quite a few days the first support in my game plan, we‘re getting once again close to a bullish formation that I called precisely to a day, and had been banging the bearish gold drum for the following two days, anticipating the downside that followed. Now, that‘s what I call welcome flexibility, extending to accentuated, numerous portfolio calls.And the permabears keep (losing capital through many bullish years in a row in some cases) calling for hundreds bucks more downside after a respite now, not even entertaining the thought that gold bottom might very well not be quarters ahead. It‘s easier to try falsely project own perma stickers onto others. Beware of wolves in ill-fitting sheep clothing. Look at full, proven track records, compare varying perspectives of yesteryear too, and wave off cheap halo effects.It‘s the above dynamic between nominal rates taking a breather, dollar getting back under pressure, commodities continuing their rise and stocks gradually resuming theirs – see the ebbing and flowing that I‘m laying down in the daily analyses on the revamped homepage, and you‘ll get a knack for my timings of local tops or bottoms just the way I did in the early Sep buying climax or in the corona crash.True mastery is in integrating and arguing opposing views with experience and adaptability daily. People are thankfully able to recognize these characteristics on their own – and they have memory too. Who needs to be told what to read and consider by those embracing expertise only to turn against it when the fruits were no longer theirs? Sour grapes. Narrow thinking is one of the dangers of our era replete with empty and shallow shortcuts. Curiosity, ingenuity and diligence are a gift to power mankind – and what you get from financial analysts – forward in a virtuous circle.If gold prices rise from here, they have bounced off support. Simple as that, especially given the accompanying signs presented. There is time to run with the herd, and against the herd – in both bull and bear trends, constantly reevaluating the rationale for a position, unafraid to turn on a dime when justified.Whatever else bullish or bearish I see technically and fundamentally in rates, inflation and dollar among much else, I‘ll be duly reporting and commenting on as always. It‘s the markets‘ discounting mechanism of the future that counts – just as gold cleared the deflationary corona crash in psring 2020, just as it disregarded the tough Fed tone of 2H 2018, just as it sprang vigorously higher in early 2016 stunning bears in all three cases with sharp losses over many months, or just as stocks stopped declining well before economic news got better in April 2020 or March 2009. Make no mistake, the markets consider transitioning to a higher inflation environment already now (the Fed timidly says that reopening will spike it, well, temporarily they say), when inflation expectations are still relatively low, yet peeking higher based on the Fed‘s own data. Such were my Friday‘s words:(…) Let‘s keep the big picture – gold is in a secular bull market that started in 2018 (if not in late 2015), and what we‘re seeing since the Aug 2020 top, is the soft patch I called. The name of the game now, is where the downside stops – I am not capitulating to (hundreds dollars) lower numbers below $1,650 on a sustainable basis. The new precious metals upleg is a question of time even though the waiting is getting longer than comfortable for many, including myself. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsStrong rebound after more downside was rejected, creating a tweezers bottom formation, with long lower knots. This is suggestive of most of the downside being already in. The Feb 25 upswing had a bearish flavor to it, while the Mar 1 one looked more constructive – and Friday‘s one is from the latter category. That doesn‘t mean though this correction won‘t be in the 5% range. The 3,900 zone is critical for the bulls to pass so as to clear the current precarious almost no man‘s land.The market breadth indicators are actually quite resilient given how far this correction has reached. New highs new lows are holding up still very well, yet they too indicate that this correction has further to go in time. While the bullish percent index still remains in the bullish territory, it indicates how far the correction has progressed technically, and that we can‘t declare the bullish spirits as having returned just yet.Credit MarketsHigh yield corporate bonds (HYG ETF) ilustrate this fragility for they haven‘t rebounded as strongly as stocks. This correction doesn‘t appear to be as really over just yet, also given the sectoral picture that I am showing you next.S&P 500 Sectoral LookTech reversed, but higher volume would be welcome to lend the move more credibility. This sector is still the weakest link in the whole S&P 500 rebound, and not until I see the $NYFANG carve out a sustainable bottom (this needn‘t happen at the 200-day moving average really), I can declare this correction as getting close to over. The bullish take on the volume is that the value sector has undergone strong accumulation, as can be readily seen in the equal weight S&P 500 index (RSP ETF). The above chart shows that cyclicals are performing strongly – with industrials (XLI ETF) and energy (XLE ETF) leading the charge as the tech and defensives are trying to stabilize, and the same is true about consumer discretionaries (XLY ETF).Gold‘s Big Picture ViewGold‘s weekly chart shows two different stages in the reaction to rising long-term rates. The first half was characterized by the two tracking each other rather closely, yet since late Dec, the nominal rates pressure has been abating in strength within the mutual relationship. While TLT plunged, gold didn‘t move down as strongly. Real rates are negative, nominal rates rose fast, and inflation expectations have been trending higher painfully slowly, not reflecting the jump in commodities or the key inflation precursor (food price inflation) just yet – these are the factors pressuring gold as the Fed‘s brinkmanship on inflation goes on. Once the Fed moves to bring long-term rates under control through intervention – hello yield curve control or at least twist – then real rates would would be pressured to drop, which would be a lifeline for gold – the real questions now are how far gold is willing to drop before that, and when that Fed move would happen. Needless to add as a side note regarding the still very good economic growth (the expansion is still young), staglation is what gold would really love.Copper and Silver Big Picture ViewThe red metal keeps rising without end in sight, reflecting both the economic recovery and monetary intervention. This is a very bullish chart with strong implications for other commodities and silver too. That‘s the essence of my favorite play in the precious metals – long silver short gold spread, clearly spelled out as more promising than waiting for gold upswing to arrive while the yellow metals‘ bullish signs have been appearing through Feb only to disappear, reappear, and so on.As you can see, silver performance approximates commodity performance better than gold one. And as the economic recovery goes on, it‘s indeed safer to be a silver bull than a gold bull – another of my early Feb utterances.Miners to Gold Big Picture ViewThis gold sectoral ratio made an encouraging rebound last week, but isn‘t internally as strong as it might appear, because the juniors (GDXJ ETF) aren‘t yet outperforming the seniors (GDX ETF), which had been the case in early 2021 and late in Feb as well – right till I sounded the alarm bells on Feb 23-24. This is precisely why I was not bullish in tone at all in the past week, as gold hadn‘t been acting as strongly now as it had been right before the Feb 22 upswing that I called. And I am missing this ingredient at the moment still.SummaryStock bulls stepped in and repaired much of Thursday‘s damage, flipping the balance of power as more even at the moment. While the medium-term factors favor the bulls, this correction is slated to go on still for longer, as all eyes are on tech (big names) as the deciding sector.Gold still remains acting weak around the lower border of its support zone, silver is refusing to decline more, and signs overall favoring a rebound, are appearing. It‘s still a mixed bag though, with especially gold being far from out of the woods yet.
How to Join the Mining Party… Before it Ends

How to Join the Mining Party… Before it Ends

Finance Press Release Finance Press Release 08.03.2021 18:39
Forget gold and silver for a moment. Do you hear the music? Yes, it’s coming from the mining ETFs club. But how long will the party last?And more importantly, why miners, you may ask? Because miners tend to outperform in the early days of a major rally.After closing only $0.10 below my initial downside target of $31 on Mar. 1 , the GDX ETF could be ripe for an upward revision. Able to ignore much of last week’s chaos, the GDX ETF’s outperformance of gold and silver signals that the tide has likely turned.Please see below:Figure 1To that point, I warned on Mar. 1 that help was on the way:The GDX ETF has garnered historical support at roughly $29.52. The level also coincides with the early-March high, the mid-April low and the 61.8% Fibonacci retracement level. As a result, a corrective upswing to ~$33/$34 could be the miners’ next move.Furthermore, after alerting subscribers on Mar. 4 – writing that when gold moves to $1,692, we’ll automatically open long positions in the miners – the GDX ETF ended Friday’s (Mar. 5) session up by 3.2% from my initial entry of ~$30.80 - $31. Thus, from here, the GDX ETF has roughly 3.8% to 7.0% upside (as of Friday’s close) before the $33/$34 levels signals that the momentum has run its course.For now, though, positioning for more upside offers a solid risk-reward proposition . Prior to the initial decline, miners were weak relative to gold . However, after outperforming on Mar. 5, their steady hand was a sign of short-term strength. If you analyze the chart below, you can see that the size and shape of the current price action actually mirrors what we witnessed back in April.Please see below:Figure 2 - VanEck Vectors Gold Miners ETF (GDX), GDX and Slow Stochastic Oscillator Chart Comparison – 2020For context, I wrote on Mar. 5:Miners stopped their decline practically right in my target area, which I based on the 50% Fibonacci retracement and the 2020 highs and lows. Moreover, the proximity of the $31 level corresponds to the 2019 high and the 2016 high. Since so many support levels coincide at the same price (approximately), the latter is likely to be a very strong support. Moreover, the RSI was just close to 30, which corresponded to short-term buying opportunities quite a few times in the past.In addition, a short-term upswing could provide a potential pathway to $35 – as this level also corresponds with the GDX ETF’s late-February high, its monthly declining resistance line and its 50-day moving average. The abundance of resistance levels – combined with the fact that an upswing would further verify the GDX ETF’s breakdown below the neckline of its potential head and shoulders pattern – should keep the upward momentum in check.Over the medium-term, the potential head and shoulders pattern – marked by the shaded green boxes above – also deserves plenty of attention.For context, I wrote previously:Ever since the mid-September breakdown below the 50-day moving average , the GDX ETF was unable to trigger a substantial and lasting move above this MA. The times when the GDX was able to move above it were also the times when the biggest short-term declines started.(…)The most recent move higher only made the similarity of this shoulder portion of the bearish head-and-shoulders pattern to the left shoulder (figure 2 - both marked with green) bigger. This means that when the GDX breaks below the neck level of the pattern in a decisive way, the implications are likely to be extremely bearish for the next several weeks or months.Due to the uncanny similarity between the two green rectangles, I decided to check what happens if this mirror-similarity continues. I used purple, dashed lines for that. There were two important short-term price swings in April 2020 – one shows the size of the correction and one is a near-vertical move higher.Copying these price moves (purple lines) to the current situation, we get a scenario in which GDX (mining stocks) moves to about $31 and then comes back up to about $34. This would be in perfect tune with what I wrote previously. After breaking below the head-and-shoulders pattern, gold miners would then be likely to verify this breakdown by moving back up to the neck level of the pattern. Then, we would likely see another powerful slide – perhaps to at least $24.This is especially the case, since silver and mining stocks tend to decline particularly strongly if the stock market is declining as well. And while the exact timing of the market’s slide is not 100% clear, stocks’ day of reckoning is coming . And it might be very, very close.As I explained previously, based on the similarities to the 1929 and 2008 declines, it could be the case that the precious metals sector declines for about 3 months after the general stock market tops. And it seems that we won’t have to wait long for the latter. In fact, the next big move lower in stocks might already be underway, as the mid-Feb. 2021 top could have been the final medium-term top.In conclusion, the gold miners should continue to glisten as oversold conditions buoy them back to the $33-$35 range. Due to the GDX ETF’s recent strength, combined with gold rallying off of the lows on Mar. 5, the PMs could enjoy a profitable one-week (or so) party. However, with the celebration likely to be short-lived, it’s important to keep things in perspective. While this week’s performance may elicit superficial confidence, medium-term clouds have already formed. As a result, positioning for an extended rally offers more risk than reward.(We normally include the "Letters to the Editor" section in the full version of Gold & Silver Trading Alerts only, but today I decided to include it also in this free version of the full (about 10x bigger than what you just read) analysis, so that you get the idea of how this part of the analysis looks like. It might be quite informative too. Enjoy:)Letters to the EditorQ: Could you update your thoughts regarding physical [gold and silver] for those looking to acquire additional positions - specifically, what do you think premiums and availability are going to look like when/if spot goes a $100 or $200 down from here? By way of example, I bought some U.S. gold buffaloes at $1854 spot at $1954. Those same coins at $1710 spot are still around $1930, if there are any to be found.A: It’s a tough call, because the premium values don’t follow the technical patterns. Still, based on the analogy to situations that seem similar to what we saw recently, it seems that we can indeed say something about the likely physical values close to the likely $1,450 bottom.Figure 43 - Source: didthesystemcollapse.orgThe above chart shows the eBay premium for 1 oz Gold American Eagle coins over the spot gold price.In April 2020, the premium spiked at about 14%. It was likely even higher in March (we don’t have the direct data), but the volatility back then was bigger than it is right now, so it seems that the current premium and the April 2020 premium values are a better proxy for the future bottoming premiums than the March 2020 bottom premium would be. If the volatility increases, one could see the premium at about 15% or so.With gold at about $1,450, the above-mentioned information means Gold American Eagle coins can cost about $1,670.Still, since gold futures prices seem more predictable than the prices of bullion coins, I’d focus on the former even while timing the purchase of the latter.Moreover, please note that I’m planning to focus on buying mining stocks close to the bottom and move to metals only later. The reason is that miners tend to outperform in the early days of a major rally (just like they did in the first quarter of 2016). The fact that the premium is likely to be high when gold bottoms in a volatile manner is yet another reason for the above. When switching from mining stocks to physical holdings several weeks or months later, one might be buying at a smaller premium over the spot, and also after having gained more on miners than on the metals. Of course, the above is just my opinion, and you can purchase whatever you want – after all, it’s your capital and your investment decisions.Q: Please note that I am glad to see gold moving downwards but I am a little confused – the trading report I just received recommends selling at 1690ish but the mailing previously said 1450ish - please see attached.Could you please investigate and advise.A: If anything in the Gold & Silver Trading Alerts seems confusing, please refer to the “Summary”, the trading/investment positions, and the “Overview of the Upcoming Part of the Decline” sections for clarification. In this case, we exited the remaining short positions when gold hit $1,693 and almost immediately entered long ones (when gold hit $1,692). We now have long positions in the mining stocks with the plan to exit them in a week or so, and re-enter short positions then, because the next big move is likely to be to the downside (perhaps as low as $1,450 or so). Also, the above is just my opinion, not a recommendation or investment advice.Q: Hi P.R., thanks for the advice on this trend, it’s been an amazing trade.As I’m trading on XAUUSD, are you also able to advise the targets for a gold long entry,or should I wait for the final bottom before opening any longs?A: I’m very happy that you’re making profits thanks to my analyses. While I think that the very short-term (for the next 5 trading days or so) outlook for gold, silver and mining stocks is bullish, I think the targets are more predictable for mining stocks than they are for gold and – especially – silver. Still, this time, the short-term upside target for gold is also relatively clear – at about $1,770. That’s why I put the $1,758 in the “For-your-information target” for gold in the “Summary” section below.Q: Are we looking for the short-term upside move to be 1-5 weeks before the final decline into the 1350-1500 zone? I'm a little unsure of the timing you're laying out.A: I’m looking for the short-term upswing to take place between 1 and 3 weeks – that’s the part of the “Overview of the Upcoming Part of the Decline” section about it:It seems to me that the initial bottom has either just formed or is about to form with gold falling to roughly $1,670 - $1,680, likely this week.I expect the rebound to take place during the next 1-3 weeks.After the rebound (perhaps to $33 - $34 in the GDX), I plan to get back in with the short position in the mining stocks.In my opinion it’s most likely that this counter-trend rally will take about 1 – 1.5 weeks. Then, I think that the decline to about $1,450 in gold will start.Q: Thank you for sending out the Alert # 2 with the new changes in the Gold and Silver trades today. This is necessary, so please send out the alert once you enter back to the short positions, please.A: I’m happy that you enjoyed this intraday Alert. I will indeed send you – my subscribers – an intraday confirmation that the long positions were closed and when we enter new short positions. Still, please note that we already have binding profit-take exit prices in place, which means that when prices move to the target levels (e.g., GDX to $33.92), the long positions should be automatically closed, and profits should be taken off the table – even without an additional confirmation from me (it takes time for me to write and send the message and then some time usually passes before one is able to act on my message).Q: You have informed us to make the move when the Gold price “REACHES” $1693.00. My question is; Does the word “Reach” mean when the price touches that point, if only for a moment, or does “Reach” mean when it closes the day at or below $1693.00?Thank you for your response to this question.A: “Reaching” a price means the same thing as “touching” the price or “moving to” the price. This means moving to this price level on an intraday basis – even for just one tick . If I mean closing prices, I will specifically describe them as such.For instance, I currently have binding exit positions for the current long position in the mining stocks – and these are exactly the price levels that I have put in my brokerage account as a limit sell order.Q: Please comment on the Hindenburg Omen for stocks:Figure 44 - Source: RefinitivA: Thanks. The Hindenburg omen is not one of the most reliable indicators - even on the above chart, it’s clear that most of the signals were not followed by declines. Please note how many fake initial signals there were before stocks finally declined in 2019 or 2020. There are many other reasons to think that stocks are going to move much lower, though. In the very short-term they could still move higher, but this move could be fake and could turn out to be the right shoulder of the head-and-shoulders top formation.Q: 1) for shorter-term trades such as the potential 10% pop in the GDX, is NUGT better?2) the plan after we re-enter a short trade when the GDX gets to $33/$34 might mean a longer haul before we hit rock bottom . You have mentioned time-scales up to 20 weeks (ish). Due to a longer holding period , would the CFD route be a cheaper route when compared to NUGT? I’m asking in general terms because each provider imposes different fees and I don’t expect you to comment on the fees charged by IG, which is the service I use.I also recognize that NUGT only offers 2 X leverage, whereas CFD’s offer up to five times leverage.Finally, the manner in which you detail the rich tapestry of the economic forces that impact PMs is revealing and educational. I find this all fascinating.I have my own views which can be summed up like this: How many inflationary false-dawns and panics has the bond market had? Ever since 2008, when the FED launched QE, there have been numerous bouts and hissy fits of inflationary expectations that have subsequently sunk like a dodgy soufflé. I think this time is no different and it’s entirely possible the 30-year bond could drop to ZERO. I am in the deflationary camp.How might the 10 year at zero or possibly sub-zero and longer, out on the duration curve to (TLT ETF) dropping to 0.5%, affect the price of gold?Your thoughts as ever, are much appreciatedA: 1) That depends on whether one seeks leverage or not, and how much thereof. Please note that some short-term trades could sometimes become medium-term trades if the market decides to consolidate or move in the other direction before continuing the predicted trend. In this case, non-leveraged instruments are at an advantage over the leveraged ones, because they don’t suffer from the back-and-forth trading as much as the leveraged ones do.If one’s desired exposure to the GDX ETF wouldn’t exceed the cash that one dedicated to trading, then in order to have the same exposure one would simply have half of the capital employed in NUGT (which is 2x leveraged). This way, the exposure would be identical, but the NUGT would imply additional risk of losing more capital if the trade takes much longer than planned and/or if the price moves adversely first.Please note that there is also an additional way to gain leverage (it’s not available for everyone, though) and that is through the use of margin on one’s brokerage account. I’d prefer to use margin for the GDX before aiming to gain leverage through NUGT.In other words, I’d first use more cash for GDX before I’d go into NUGT. If I wanted to have even bigger exposure than the one achieved by employing more capital to GDX, I would then consider using margin, and then I would consider using NUGT if I still wanted to get more leverage.There might be some traders who would seek to combine both for even bigger leverage (buying NUGT on margin), but this is definitely not something that I’d recommend to most people. In fact, it seems that in many cases, sticking to the GDX would be a good way to go.2) I think I already replied to the first part of your question (NUGT vs. CFD) above. Also, for other people reading this reply – please note that CFDs (contracts for difference) are not available in many areas, including the USA and Canada.I’m glad to read that you enjoy reading my explanations of the current situation in the markets (precisely, my opinions on it).Real interest rates are one of the most important drivers for gold (along with the USD Index), so a drop in the 10-year rates to zero or sub-zero levels would likely be very beneficial for the gold prices.Figure 45Also, based on the pace at which the rates have rallied recently, they might be topping here, but… There was no decline in the previous 40 years that was as big as what we saw between 2018 and 2020. Consequently, the corrective upswing might be bigger as well. Also, the above chart is not necessarily the scale that is big enough to make very long-term conclusions.Figure 46Over the past centuries, whenever the rates fell very low, they then rallied back up with vengeance. After WW2, it theoretically would have been a “good idea” to keep stimulating the economy with low rates – and yet, they soared. Right now, the monetary authorities strive to be very dovish and keep pumping liquidity into the system, and yet the rates are rallying anyway.So, while the analogy to the previous years – or the past few decades – suggests that the rally in the rates might be over or close to being over, the very long-term chart suggests otherwise.To make the situation even more complicated, if the stock market has already topped in February, and we have already entered the Kondratiev winter cycle, it means that we can theoretically expect the rates to fall, then rise in a credit crunch, and then fall much lower.All in all, the outlook for the interest rates is anything but simple and clear. Perhaps what we see right now already IS the credit crunch and the 10-year rates are on their way to above 2% - after all, they used to return above their 200-day moving average after the previous medium-term declines. It seems to me that the move above 2% in the 10-year rates could correspond with gold’s decline below $1,500.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
STIMULUS AND CONSUMERS ARE THE KEYS TO FURTHER US/GLOBAL ECONOMIC RECOVERY – PART II

STIMULUS AND CONSUMERS ARE THE KEYS TO FURTHER US/GLOBAL ECONOMIC RECOVERY – PART II

Chris Vermeulen Chris Vermeulen 09.03.2021 13:46
This is a continuation of our extended technical review of what my research team and I believe will be required for the US/Global markets to enter a stronger post-COVID-19 recovery phase. If you missed Part I of this research series then you can find it here: www.thetechnicaltraders.com/stimulus-and-consumers-are-the-keys-to-further-us-global-economic-recovery-part-i/. In this Part II, we will look at how potential currency shifts will prompt new trending in various economic sectors.   The past 20+ years have really changed how the markets operate from a standpoint of capital deployment and capital function.  We certainly live in interesting times from a trader and investor perspective. There is more capital floating around the globe right now than ever before... and that changes certain things.The Components Of A Frenzied Global MarketThe first and most notable change is to create volatility at levels we have really never seen before.  The average daily price range on the QQQ or SPY charts is more than 3x historical price range levels.  This simple fact shows that a 1% price range, which used to be considered a moderately large price range for the price to move, is now considered a below normal range.  This new level of volatility has applied to many of the largest SPY and NASDAQ-related stock symbols over the past few years as capital was deployed into various sectors with increasing speed and volition.We profit from volatility by using non-directional options trading strategies.Watch our webinar on How To Become An Options Strategy Master now!The US and global central banks have continued to deploy easy money policies since the 2008-09 Housing/Credit crisis which has perpetuated a Roaring-20s type of mentality throughout the world.  Even though we could point out certain nations that are underperforming economically, generally the world has seen an unprecedented rise in credit, debt, and associated spending capabilities over the past 10+ years.  This level of unusual economic expansion comes with certain consequences, similar to the expansion that led up to the 2008-09 Housing/Credit crisis.It also has to be noted that COVID-19 has really altered the way consumers are engaging in the economy right now.  Online, stay-at-home, avoid outside risks type of activities have really become the new normal. Many sociologists continue to suggest consumers may be slower to move back into old economic habits (pre-COVID-19 spending habits).  This change in how people perceive risks and adopt new economic processes will likely lead to a rise in digital productivity, the adoption of technology solutions, and a change of spending habits, which could prompt a much bigger transition for certain market sectors that have been overlooked recently.Watch Chris and Neil Present at The Mad Hedge Traders and Investors Summit - Click to Register for FREE!One thing that has certainly benefited from COVID-19 is the number of new investors/traders plying their skills (and hard-earned cash) in the markets.  We've never seen anything like this explosive growth in retail market participation over the past 20+ years.  The closest we've come to this level of retail trader participation in the equities and financial markets was in 1998~99 during the height of the DOT COM bubble.  This incredible consumer participation in the global equities trends/trading has helped propel many US major indexes/sectors to incredible heights – and it may not end any time soon.The following Monthly ratio chart, comparing the growth in the QQQ, SPY, and GOLD since January 1, 2009 (the anchor price) highlights how the frenzy of investing really started to accelerate after 2012 and began to move into a parabolic trend in 2016.  If you follow the MAGENTA QQQ ratio after the vertical dateline on this chart, you will see how early 2017 started a dramatic acceleration in volatility and trending as the QQQ accelerated higher by more than +186%.  Meanwhile, the SPY, which was somewhat overlooked throughout this rally phase, moved higher by only +85%.Where is the Consumer?  Has The Consumer Really Retreated Because Of COVID-19?One prime example of this frenzy is this recent Yahoo! Finance story about burned Banksy Art which sold for over $390,000 as a Non-Fungible Token. The idea that anyone would buy a burned piece of art for this price shows that money has turned into a game for some people.  The gamification of wealth has likely transitioned into global social thinking in ways that we have not even considered yet.Even though we've highlighted how the global equity/financial markets have rallied considerably over the past 5+ years, we still need to see the consumer reenter the economy in a more traditional sense. This M1 Velocity of Money chart shows that after the 2009 peak, the velocity of money, the rate at which money is exchanged within an economy, has collapsed to levels we have not seen in 60+ years, and quite possibly below levels relative to the Great Depression (1930s).So, what's happening in the world right now to present these types of charts/data?  How can the world be flush with capital/cash and the data show that the consumer is still actively engaged in purchasing various items, which include very active engagement in the global equity markets and speculative trading positions, while the M1 Velocity of Money data shows an incredible collapse after COVID-19 hit?The answer is simple.  The US Federal Reserve has pushed more cash into the global economy over the past 10+ years than at any time in history (more than $16 Trillion since 2009).  Prior to that date the total amount of capital/debt the US Fed only pushed a total of $10.6 Trillion into the economy over a 40-year time span.  There is nearly 3x the total number of US dollars floating around the globe right now than at any time since prior to the 1950s.Eventually, we are certain that, this extended cash will translate into GDP growth – which will strengthen the Velocity of Money ratio over time.  What it will take is for the economy and the consumer to transition into a new form of expansion related to the post-COVID-19/post Technology euphoria that is currently taking place.Over the next 20 to 30+ years, we are going to see some very big trends in various sectors and commodities.  The global central banks have pushed so much capital out into the world that, once it finds its true economic purpose, we believe the function of this capital will be deployed into various economic components in ways we have not even considered yet.  New industry, new forms of consumer products, and consumer participation will likely evolve where capital can be put to use to improve the GDP levels.  Cryptos may be the start, a stepping stone, toward a much more dynamic solution for how capital is used and deployed within the global marketplace.Don’t miss the opportunities to profit from the broad market sector rotations we expect this year, which will be an incredible year for traders of my Best Asset Now (BAN) strategy.  You can sign up now for my FREE webinar that teaches you how to find, enter, and profit from only those sectors that have the most strength and momentum. Staying ahead of sector trends is going to be key to success in volatile markets.For those who believe in the power of trading sectors that show relative strength and momentum but don’t have the time to do the research every day, let my BAN Trader Pro newsletter service do all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my BAN Trader Pro subscribers.In Part III of this research article, my team and I will continue to explore the future possibilities and make some suggestions as to how you can prepare for these big trends right now.  Remember, this is a longer-term outlook of opportunities for traders/investors.  The real gains related to this research will come 5 to 10+ years out into the future if you are able to identify how and where capital is being deployed for gains. Have a great day!
Gold Drops below $1,700, while Senate Passes Biden’s Plan

Gold Drops below $1,700, while Senate Passes Biden’s Plan

Finance Press Release Finance Press Release 09.03.2021 14:14
Gold remains inert to President Biden’s large and hazardous economic plan, and ended up dropping below $1,700.President Joe Biden’s $1.9 trillion COVID-19 stimulus is coming! On Saturday, the U.S. Senate passed the American Rescue Plan on a party-line 50-49 vote. This means that after the House’s vote on Tuesday, Biden could sign the bill into law soon, and those $1,400 payments to most Americans could start to go out as soon as this month.The final bill includes not only $400 billion in checks of $1,400 to most Americans, but also $300 a week in extended unemployment benefits, and $350 billion in aid to state and local governments.The American Rescue Plan would be one of the largest stimulus packages in U.S. history. It would also be one of the most frivolous and superfluous economic programs. There is simply no need for such a large plan. Please take a look at the chart below.As one can see, U.S. personal income has increased during the pandemic, not decreased. Once again, people are now receiving higher income than one year ago. So, Biden’s stimulus with another round of $1,400 checks is not economically or socially justified.Indeed, the U.S. economy is already recovering. On Friday (Mar. 5), we got surprisingly good data about the American labor market , that showed the economy added 379,000 jobs in February, much above expectations. Meanwhile, the unemployment rate has slightly decreased further, as one can see in the chart below. Employment is still down by 9.5 million, or 6.2 percent, from the pre-pandemic level seen one year ago, but additional unemployment benefits or plain checks will not help bring people back into employment – in fact, the effect may turn out to be the reverse.Hence, Biden’s fiscal stimulus will bring little benefit to the economy, while significantly expanding the federal debt and risking overheating the economy. Indeed, the plan is estimated to increase the already high public debt (see the chart below) by an additional ten percentage points as a share of GDP .Implications for GoldWhat does this all mean for gold prices? From the fundamental point of view, Biden’s plan should be positive for the yellow metal. This is because it can increase inflation in the long-run, if people finally decide to spend all the money they got from Uncle Sam. It will not happen in the immediate future, as households will initially save the received payments, and some of them will repay their debts, but they are likely to spend more this year, to compensate for curbed consumption in 2020.However, whether Biden’s plan turns out inflationary or not, it will expand the already mammoth public debt. It should weaken the position of the greenback and increase the odds for a debt crisis or paying out this debt through inflation or financial repression. The higher the debt, the more difficult it will be for the Fed to normalize interest rates (welcome to the debt trap , my friends). All these factors should support gold prices in the long run.However, gold remains deaf to Biden’s disharmonious symphony. Indeed, as the chart below shows, the yellow metal has declined below the important level of $1,700 last week. It seems that the fiscal stimulus (together with the rollout of vaccinations and the economic recovery) has so far strengthened the risk appetite among investors who don’t focus on long-term consequences of the fiscal stimulus.This may change one day, but the sentiment in the gold market is clearly negative right now, and the fundamentals are more positive. The fundamentals may come to the fore in the end. However, gold may struggle further, especially if real interest rates go up again.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Is Gold Now Replaying 2010-2012?

Is Gold Now Replaying 2010-2012?

Finance Press Release Finance Press Release 09.03.2021 14:57
The 2019-2021 gold chart is disturbingly similar to that of 2010-2012, but it does not have to be the harbinger of a bear market.Many ancient cultures saw history as cyclical. According to this view, society passes through repeated cycles. Can this apply to gold as well? I’m not referring here to the simple fact that we have both bull and bear markets in the precious metals – I refer here to the observation that gold’s price pattern seen in 2019-2021 mirrors that of 2010-2012 . Please take a look at the chart below.As you can see, in both periods, gold was steadily rising to a peak in the third quarter of the second year. A decade ago, the yellow metal gained 29 percent in 2010 and 74 percent as it hit the top. Then, it declined 19 percent by the end of 2011. Fast forward to more recent times. Gold gained 18.4 percent in 2019 and 62 percent at the peak. Afterwards, it declined 9 percent by the end of 2020.So, although the magnitude has now been weaker than in the aftermath of the Great Recession , the pattern is quite similar. The next chart – which presents the normalized gold prices in both periods to indices (when the starting point equals 100) – nicely illustrates how gold in 2019-2021 closely resembles gold from 2010-2012.This similarity may be disturbing. Should the pattern hold, then gold could go down significantly and stay in a sideways trend for years. As a reminder, this is what happened a decade ago. Gold bulls fought until the end of 2012, when they gave up and the yellow metal entered a full bear market, plunging 45 percent from the top to the bottom in December 2015. Then, it stayed generally flat till the end of 2018. If this cycle replays, we could see the price of gold go below $1,200 by the end of 2024.To be clear, there are some arguments to support the bearish case . Just as in the 2010s, the world is recovering now from the global economic crisis . The recession is over and the prospects are only better. Perhaps they’re not rosy, but they’re certainly better than many previously expected, which is what matters for the financial markets. As the worst is behind us, the risk appetite is returning, which could put gold and other safe-haven assets into oblivion. Actually, some could even argue that gold may now plunge even earlier, as a decade ago it was supported by the European sovereign debt crisis , which peaked in 2011-2012.However, there are also important reasons why gold could break the pattern and diverge from the 2010-2012 trend. First, we now have a much more dovish Fed . The U.S. central bank slashed the federal funds rate much quicker and expanded its balance sheet more decisively. Additionally, to avoid a taper tantrum caused by its announcement about tapering asset purchases, this time the Fed will normalize its monetary policy in a very, very gradual way, if at all. It means that interest rates will stay lower for longer. Lastly, the U.S. central bank changed its monetary policy framework, i.e., it prioritized the labor market over price stability and became more tolerant to higher inflation .Second, we also have a much easier fiscal policy . Even before the global pandemic , Trump significantly expanded budget deficits , but the Great Lockdown made them even larger. As pundits believe that the fiscal response in the aftermath of the global financial crisis of 2007-2009 was too small, they now want to go big – indeed, Biden’s $1.9 trillion economic plan is waiting to be passed by Congress.Third, this recovery might be more inflationary than a decade ago . This is because not only did the monetary base increase, but the broad money supply did as well. Last time, the Fed injected a lot of liquidity to the banking sector to bailout the banks. Now, the money has flowed much more through Main Street and the household sector, which could turn out to be more inflationary when all this money will be spent on goods and services. Also, last time we observed some deleveraging in the private sector, while now the supply of loans is continuously increasing at a positive rate. We are also already observing reflation in the form of a commodity boom, so gold may follow suit.To sum up, the patterns seen in the gold market in 2010-2012 and 2019-2021 are remarkably similar. So, the recent gold’s weakness may be really disturbing. However, this resemblance does not have to be a harbinger of further problems coming for gold bulls . After all, as Mark Twain is reputed to have said, “history doesn’t repeat itself, but it often rhymes”. Indeed, the macroeconomic and political environment is now clearly different than a decade ago – it’s more fundamentally positive for the price of gold.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Stocks Shaking Off Weak Tech As Gold Bottoms?

Stocks Shaking Off Weak Tech As Gold Bottoms?

Monica Kingsley Monica Kingsley 09.03.2021 15:28
Stocks spiked higher, but not before going sideways to down prior on the day. And the close to the session hasn‘t been convincing either – does it count as a reversal? In my view, we haven‘t seen one yesterday really, regardless of this correction not being over just yet. There are still some cracks I tweeted yesterday about in need closing first, such as the worrying corporate bonds performance, manifest in the HYG:SHY ratio, or the tech searching for the bottom (it‘s $NYFANG precisely). Quoting from yesterday‘s extensive analysis spanning beyond stocks, metals and the Fed:(…) Stocks have had a great run over the past 4 months, getting a bit ahead of themselves in some aspects such as valuations. Then, grappling with the rising long-term rates did strike.So did inflation fears, especially when looking at commodities. Inflation expectations are rising, but not galloping yet. What to make of the rising rates then? They‘re up for all the good reasons – the economy is growing strongly after the Q4 corona restrictions (I actually expect not the conservative 5% Q1 GDP growth, but over 8% at least) while inflation expectations are lagging behind. In other words, the reflation (of economic growth) is working and hasn‘t turned into inflation (rising or roughly stable inflation expectations while the economy‘s growth is slowing down). We‘re more than a few quarters from that – I fully expect really biting inflation (supported by overheating in the job market) to be an 2022-3 affair. As regards S&P 500 sectors, would you really expect financials and energy do as greatly as they do if the prospects were darkening?Stocks are well positioned to keep absorbing the rising nominal rates. What has been the issue, was the extraordinarily steep pace of such move, leaving long-term Treasuries trading historically very extended compared to their 50-day moving averages. While they can snap back over the next 1-2 weeks, the 10y Treasury bond yield again breaking 1.50% is a testament to the Fed not willing to do anything at the moment. Little does the central bank care about commodities moves, when it didn‘t consider any market moves thus far as unruly.Gold market offered proof of being finally ready for a rebound, and it‘s visible in the closing prices of the yellow metal and its miners. Being more than a one day occurence, supported by yesterday presented big picture signals, the market confirmed my yesterday‘s suggestion of an upcoming gold. It appears we‘ll get more than a few days to assess the legs this rally is made of, facilitating nimble charting of the waters ahead my usual way:(…) Just as I was calling out gold as overheated in Aug 2020 and prone to a real soft patch, some signs of internal strength in the precious metals sector were present this Feb already. And now as we have been testing for quite a few days the first support in my game plan, we‘re getting once again close to a bullish formation that I called precisely to a day, and had been banging the bearish gold drum for the following two days, anticipating the downside that followed. Flexibility and broad horizons result in accentuated, numerous other portfolio calls – such as long Bitcoin at $32,275 or long oil at $58 practically since the great return with my very own site. We‘re now on the doorstep of visible, positive price outperformance in the gold miners (GDX ETF) as gold prices didn‘t break the higher bullish trend by declining through both the Mar 4 presented supports of my game plan. As I wrote yesterday, if prices move higher from here, they have simply bounced off support, especially given the accompanying signs presented, not the least of which is the dollar getting back under pressure. Make no mistake, the greenback isn‘t in a bull market – it‘s merely consolidation before plunging to new 2021 lows. I have not been presenting any USDX declining resistance lines and breakout arguments, because prices can be both above such a line, and lower than at the moment of „breakout“ at the same time – ultimately, rising and declining supports and resistances are a play on the speed of the move, where pure inertia / deceleration / reprieve doesn‘t break the prior, higher trend. And as I called in summer 2020 the dollar to roll over and keep plunging, that‘s still what‘s unfolding.How does it tie in to commodities and stocks? We‘re not at extreme moves in either, and I see copper, iron, oil, agrifoods as benefiting from the reflationary efforts greatly. Similarly and in spite of the $NYFANG travails, it would be ill-advised to search for stock market tops now (have you seen how well the Dow Industrials is doing?) – no, we‘re not approaching a top that I would need to call the way I did in the early Sep buying climax. This is still the time to be running with the herd, and not against it – you can ignore the noise to the contrary for both the S&P 500 and commodities have a good year ahead. As for precious metals, we might have seen the bottom already – and in any case by the current shape of things, I don‘t see it occuring quarters ahead and hundreds buck lower.Bringing up the constant reevaluation of position‘s rationale, market reactions and narratives:(…) It‘s the markets‘ discounting mechanism of the future that counts – just as gold cleared the deflationary corona crash in psring 2020, just as it disregarded the tough Fed tone of 2H 2018, just as it sprang vigorously higher in early 2016 stunning bears in all three cases with sharp losses over many months, or just as stocks stopped declining well before economic news got better in April 2020 or March 2009. Make no mistake, the markets consider transitioning to a higher inflation environment already now (the Fed timidly says that reopening will spike it, well, temporarily they say), when inflation expectations are still relatively low, yet peeking higher based on the Fed‘s own data. Gold is in a secular bull market that started in 2018 (if not in late 2015), and what we‘re seeing since the Aug 2020 top, is the soft patch I called. The name of the game now, is where the downside stops – and it‘s one of the scenarios that it has just happened, especially if gold convincingly closed back above $1,720 without undue delay.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookWe have seen two intraday reversals to the downside yesterday, yet I think the effects would prove a temporary obstacle to the bulls only. Such candlestick patterns usually slow down the advance, but don‘t end it – and that‘s consistent with my yesterday‘s words of most of the downside being already in. Once the 3,900 zone is confidently passed, the bears would have missed the chance to reach below Thursday‘s lows.Credit MarketsHigh yield corporate bonds (HYG ETF) still ilustrate ongoing fragility for they have plunged below their Feb lows. This correction doesn‘t appear to be as totally over just yet, also given the sectoral picture that I am showing you next.Put/Call Ratio and VolatilityOption players clearly aren‘t concerned by yesterday‘s S&P 500 price action, and the VIX is painting a similarly neutral picture – just as the sentiment overall. Very good, we‘re primed to go higher next, from a starting position far away from the extreme greed levels.Technology and ValueThe sectoral divergence continues, and tech is still the weakest link in the whole S&P 500 rebound. The big $NYFANG names, the Teslas of this world, are the biggest drag, and not until these carve out a sustainable bottom (this needn‘t happen at the 200-day moving average really), I can declare this correction as getting close to over. It‘s the cyclicals, it‘s value stocks that is pulling the 500-strong index ahead, with financials (XLF ETF), industrials (XLI ETF) and energy (XLE ETF) leading the charge.Treasuries and DollarNominal, long-term Treasury rates have at least slowed their quickening Feb pace, even in the face of no action plan on the table by the Fed – the dollar moved higher on the realization next, and it‘s my view that once new Fed intervention is raised, it would have tremendous implications for the dollar, and last but not least – the precious metals.Gold and SilverFinally, this is the much awaited sign, enabling me to sound some bullish tone in gold again – the miners are outperforming the yellow metal with more than a daily credibility, which I view as key given the lackluster gold price action before yesterday (absence of intraday rebounds coupled with more downside attempts). It would turn stronger once the gold juniors start outperforming the seniors, which is not the case yet.Coupled with the 4-chart big picture view from yesterday, it‘s my view that the gold market is laying the groundwork for its turning:(…) Real rates are negative, nominal rates rose fast, and inflation expectations have been trending higher painfully slowly, not reflecting the jump in commodities or the key inflation precursor (food price inflation) just yet – these are the factors pressuring gold as the Fed‘s brinkmanship on inflation goes on. Once the Fed moves to bring long-term rates under control through intervention – hello yield curve control or at least twist – then real rates would would be pressured to drop, which would be a lifeline for gold – the real questions now are how far gold is willing to drop before that, and when that Fed move would happen. Needless to add as a side note regarding the still very good economic growth (the expansion is still young), stagflation is what gold would really love.Silver is carving out a bottom while both copper and platinum are turning higher already – these are That‘s the essence of one of my many profitable plays presented thus far – long silver short gold spread – clearly spelled out as more promising than waiting for gold upswing to arrive while the yellow metals‘ bullish signs have been appearing through Feb only to disappear, reappear, and so on.SummaryStocks haven‘t seen a real reversal yesterday, but more backing and filling till the tech finds bottom, appears due. The medium-term factors favor the bulls, but this correction isn‘t over yet, definitely not in time.Now, gold can show some strength – and silver naturally even more. The signs overall favoring a rebound, are appearing with increasing clarity for the short term, and the nearest weeks will show whether we have made a sustainable bottom already, or whether the $1,670 zone will get tested thoroughly. The bulls have the upper hand now.
Intraday Market Analysis – DAX Shrugs Off Correction

Intraday Market Analysis – DAX Shrugs Off Correction

John Benjamin John Benjamin 10.03.2021 08:14
DAX 30 surges to new highThe German index rallied to a new high as investors priced in the benefits of economic normalization.The ascent above 14180 was the result of short-covering and momentum trading when that critical resistance broke away. The latest correction might have ended right there with the bullish bias intact on the daily timeframe.Short-term traders’ profit-taking might cause a retracement towards the demand zone between 14180 and 14310. However, the buying interest is likely to stay strong as trend followers jump in.USDCHF drops on profit-takingRetreating US yields have led to profit-taking on the US dollar.An RSI divergence in the overbought area was a sign of a loss in the bullish momentum. Then a 100-pip drop below the 20 and 30-hour moving averages and a bearish MA cross confirmed the overextension.The pair is now testing its first key support at 0.9250. An oversold RSI indication could attract some bargain hunters. Though a failure to hold on to that level may trigger a deeper correction towards 0.9180.USDCAD tests major resistanceAs the US dollar is grinding along a falling trendline, there is a chance of a breakout if the Bank of Canada convinces markets of its resolve to keep interest rates at a record low.Price action has been building up support above 1.2570 in a rectangle-shaped consolidation. The narrowing range between the support and the resistance is typical of the market’s indecision ahead of a catalyst.A close above 1.2700 on the daily trendline could prompt sellers to rush to cover their positions, fuelling a breakout rally.
That’s Why You Buy the Dips

That’s Why You Buy the Dips

Finance Press Release Finance Press Release 10.03.2021 14:41
Days like Tuesday (Mar. 9) are why you buy the dips. It was nothing short of a reverse rotation from what we’ve seen as of late. Bond yields moved lower; tech stocks popped.That’s why I called BUY on the Nasdaq.Inflation fears and the acceleration of bond yields are still a concern. But it looks as if things are stabilizing, at least for one day. The lesson here, though, is to be bold, a little contrarian, and block out the noise.Unless you’ve been living under a rock, you know that recent sessions have been characterized by accelerating bond yields driving a rotation out of high growth tech stocks into value and cyclical stocks that would benefit the most from an economic recovery. The Nasdaq touched correction territory twice in the last week and gave up its gains for the year.But imagine if you bought the dip as I recommended.The Nasdaq on Tuesday (Mar. 9) popped 3.7% for its best day since November. Cathie Wood’s Ark Innovation ETF (ARKK) surged more than 10% for its best day ever after tanking by over 30%. Semiconductors also rallied 6%.Other tech/growth names had themselves a day too: Tesla (TSLA) +20%, Nvidia (NVDA) +8%, Adobe (ADBE) +4.3%, Amazon +3.8%, Apple (AAPL) +4.1%, and Facebook (FB) +4.1%.In keeping with the theme of buying the dip, do you also know what happened a year ago yesterday to the date? The Dow tanked 7.8%!There’s no way to time the market correctly. If you bought the Dow mirroring SPDR DJIA ETF (DIA) last March 9, you’d have still seen two weeks of pain until the bottom. However, you’d have also seen a gain of almost 36% if you bought that dip and held on until now.Look, I get there are concerns and fears right now. The speed at which bond yields have risen is concerning, and the fact that another $1.9 trillion is about to be pumped into a reopening economy makes inflation a foregone conclusion. But let’s have a little perspective here.Bond yields are still at a historically low level, and the Fed Funds Rate remains 0%.So is the downturn overblown and already finished?Time will tell. I think that we could still see some volatile movements over the next few weeks as bond yields stabilize and the market figures itself out. While I maintain that I do not foresee a crash like what we saw last March and feel that the wheels remain in motion for an excellent 2021, Mr. Market has to figure itself out.A correction of some sort is still very possible. I mean, the Nasdaq’s already hit correction territory twice in the last week and is still about 3-4% away from returning to one. But don’t fret. Corrections are healthy and normal market behavior. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).Most importantly, a correction right now would be an excellent buying opportunity. Just look at the Nasdaq Tuesday (Mar. 9).It can be a very tricky time for investors right now. But never, ever, trade with emotion. Buy low, sell high, and be a little bit contrarian. There could be some more short-term pain, yes. But if you sat out last March when others bought, you are probably very disappointed in yourself. Be cautious, but be a little bold too.You can never time the market.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Nasdaq- That’s Why I Called BUYFigure 1- Nasdaq Composite Index $COMPFor the second time in a week, the Nasdaq hit correction territory and rocketed out of it. It saw its best day since November and proved once again that with the Nasdaq, you always follow the RSI. There could be more uncertainty over the next few weeks as both the bond market and equity market figure themselves out. However, the Nasdaq declines were very buyable, as I predicted.If you bought the dip before Tuesday’s (Mar. 9) session, good on you. Be a little bit bold and fearless right now. Take Ark Funds guru Cathie Wood, for example. Many old school investors scoffed at her comments on Monday (Mar. 8) after she practically doubled down on her bullishness for her funds and the market as a whole. After crushing 2020, her Ark Innovation Fund (ARKK) tanked over 30%. Many called her the face of a bubble. Many laughed at her.Tuesday, March 9, ARKK saw its best day in history.I’m not saying that we’re out of the woods with tech. All I’m saying is don’t try to time the market, don’t get scared and have perspective.The Nasdaq is once again roughly flat for the year, its RSI is closer to oversold than overbought, and we’re still below the 50-day moving average, near a 2-month low, and right around support at 13000.It can’t hurt to start nibbling now. There could be some more short-term pain, but if you waited for that perfect moment to start buying a year ago when it looked like the world was ending, you wouldn’t have gained as much as you could have.I think the key here is to “selectively buy.” I remain bullish on tech, especially for sub-sectors such as cloud computing, e-commerce, and fintech.Mike Wilson , chief investment officer at Morgan Stanley, had this to say about recent tech slides- “I don’t think this is the end of the bull market or the end of tech stocks per se, but it was an adjustment that was very necessary.”I like the levels we’re at, and despite the possibility of more “adjustments” in the short-run, it’s a good time to BUY. But just be mindful of the RSI, and don’t buy risky assets. Find emerging tech sectors or high-quality companies trading at a discount.For an ETF that attempts to correlate with the performance of the NASDAQ directly, the Invesco QQQ ETF (QQQ) is a good option.For more of my thoughts on the market, such as when small-caps will be buyable, more thoughts on inflation, and emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Stocks Love Rising CPI, and Gold Should Too

Stocks Love Rising CPI, and Gold Should Too

Monica Kingsley Monica Kingsley 10.03.2021 16:09
Monday‘s reversal I didn‘t trust, gave way to another upswing – still within this getting long in the tooth correction. It‘s not over, and corporate bonds aren‘t yet confirming – it has lately become a reasonable expectation that when the higher quality debt instruments (think LQD, TLT) have a good day, junk corporate bonds get under pressure, but seeing their (HYG) performance more aligned with the S&P 500 is what I am looking for in a rally on solid footing.Which is what we‘re not having yet. Just compare the tech performance to the rest of the market, especially when viewed from the decling new highs new lows (yes, these closed higher on Monday). It‘s apparent that yesterday‘s S&P 500 upswing was the result of reallocation to tech to the detriment (mild, but still) of much of the rest, in light of the key development of the day – falling Treasury yields.The stock market simply keeps dealing with the rising nominal rates, which would be easier when these move less fast and steeply than till now. Consolidation of their recent move appears underway, in fits and starts, as long-term Treasuries are:(…) trading historically very extended compared to their 50-day moving averages. While they can snap back over the next 1-2 weeks, the 10y Treasury bond yield again breaking 1.50% is a testament to the Fed not willing to do anything at the moment. On one hand, the central bank is fine with commodities on the move, which aren‘t yet really showing in CPI, (today‘s 0.4% reading is a baby step in this direction) and which the Fed claims would be only transitory. On the other hand, the bond market is buying into this assertion to a degree, because otherwise the long-term bonds decline would continue rather unabated. As we are in the reflationary stage when economic growth is rising faster than both inflation and inflation expectations, this laissez faire approach to inflation isn‘t likely to bite the Fed now as much as to truly wake up the bond vigilantes. It‘s that the „high rates“ we‘re experiencing currently, do not compare to the early 1980s, which underscores the fragility of the current monetary order. The Fed knows that, and it has been evident in the long preparatory period and baby steps in the prior rate raising and balance sheet shrinking cycle. The market will see through this, and the central bank would be forced to move to bring long-term rates down through yield curve control or a twist program, which would break the dollar, drive emerging markets, and not exactly control inflation – real rates would drop like a stone in such a scenario, turning around gold profoundly. But we‘re not yet there, as inflation is still too low and economic growth too high to force this scenario to play out. Market players are though already hedging against the rising (commodity prices thus far chiefly) inflation – and gold is still mostly on the defensive even as TIPS are starting to turn. What we‘re seeing in the miners to gold ratio, are green shoots in obvious need of follow through to turn the yellow metal sustainably around.Bottom line, if I had to pick only two markets to watch right now, it would be long-term Treasuries and the dollar.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookDaily rebound with a long upper knot, indicating consolidation ahead just as much as the low credibility Monday reversal. Force index is turning positive, but I am not looking at it to absolutely spike just yet. Overall though, the balance of forces is slowly but surely shifting towards the buyers, which would become more evident once we clear the key 3,900+ zone – perhaps even later today.Credit MarketsHigh yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio is the key non-confirmation, which can be partially explained by the bond market strains and reallocations into the long end of the curve instruments. Stocks are as a result relatively extended, yet without accompanying warning signs in the put/call ratio or the VIX. So far so good.Technology, Value and UtilitiesWhat a difference a day (of higher TLT prices makes)! Technology, which has been trading almost like utilities (lower black line) lately (yeah, reopening), rebounded ($NYFANG likewise strongly), and the value stocks endured a modest daily setback. Part and parcel of the microrotations as the stock market is getting used to higher nominal rates within the stock bull run as evidenced by the rebounding bullish percent index. Yes, this S&P 500 correction is in its latter innings.Treasuries and DollarNominal, long-term Treasury rates retreated on the day, and so did the dollar. Emerging markets liked that more than their bonds, which means that the current reprieve in yields is more likely temporary than not.Gold in the SpotlightMiners‘ outperformance of the yellow metal goes on, today illustrated with the stronger $HUI. Given the CPI readings just in, the gold bulls have a good reason to run with the assumption that even Fed‘s own real inflation underestimating models, are starting to reveal its slow appearance in the basket of consumer prices.It was on Monday when I showed you this chart first, and we‘re within a gold rebound highlighting some relative strength in the yellow metal vis-a-vis the rising rates – in the latter half of the 7-month long correction. The key narrative shift would be one of focus on inflation, inflation expectations, which would be also manifest in the Treasury inflation-protected securities (TIPS) chart. Thus far, the presented big picture view is a reason for modest, guarded optimism (in need of constant monitoring).Silver and Its MinersSilver has turned higher yesterday, and so did platinum – it‘s however the silver miners (SIL ETF), which is making the upswing a little suspect, as in need to prove itself stronger.SummaryStocks are likely to take yesterday‘s setback in their stride, and this long, drawn out correction increasingly appears to be approaching its inevitable end. The medium-term factors favor the bulls, and new highs are a question of broad based advance across the sectors, adjusted for the reopening trades favoring high beta stocks.The belated and thus far rather meek gold rebound can proceed, and should the mining stocks keep their outperformance (ideally accompanied by silver miners doing the same with respect to the white metal), that would be a hallmark of the unfolding rebound carrying on. For now, guarded optimism is still the name of the game in the precious metals arena.
Gold & the USDX: Correlations

Stocks Bulls Can Take a Rest – But Gold Ones Can‘t

Monica Kingsley Monica Kingsley 11.03.2021 15:40
The daily banging on the 3,900 threshold shows in yesterday‘s upper knot, and this milestone has very good chances of being conquered today. More important than the exact timing though, are the internals marking the setup – we‘ve indeed progressed very far into this correction. While not historically among the longest ones, it‘s still getting long in the tooth – just as I was writing throughout the week.And it is getting stale, even if I look at the star non-cofirnation, the high yield corporate bonds. Relatively modest daily upswing, outshined by investment grade corporate bonds. Yes, the credit markets are calming down, and the tiny daily long-term Treasuries upswing doesn‘t reflect that fully just yet. Besides giving breathing room to defensives such as utilities and consumer staples, it‘s also very conducive to the precious metals sector.Copper, oil or agrifoods aren‘t flashing warning signs either – this is a healthy consolidation of steep prior gains as the dollar is getting again under pressure on retreating yields. Just as stocks are undergoing the larger rotation in favor of high beta value plays (financials and manufacturing ones are doing great, airlines jumped), the leaders out of the corona deflationary crash are leading no longer (technology). The picture of the unfolding reflationary recovery is a healthy one as rates are rising on account of improving economic environment, and inflation doesn‘t really bite yet.Ideal environment for the stock market to do well (hello my profitable open position), and for commodities to do really well. While the Fed is prepping the markets for (temporary, they say) higher inflation readings, gold didn‘t react too bullishly to yesterday‘s mildly positive CPI data – just wait for PPI data which would reflect the surging commodity prices more adequately. At the moment, evaluating the strength and internals of precious metals rebound, is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and Its InternalsVolume isn‘t sharply contracting, and coupled with the price action, the rebound above 3,900 has good chance of succeeding. The path most ahead to entertain your imagination as well, looks as a little congested series of daily candles followed by a longer white one. We‘re in a stock bull market after all, and still not in danger of a significant (10%+) correction as I have been writing throughout 2021.Market breadth indicators have turned the corner really, underscoring accumulation within a returning bull market advance – just as the bullish percent index shows. A brief sideways to higher consolidation of this week‘s advance would only help to solidify it before the next run higher.Credit MarketsHigh yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio‘s degree of non-confirmation has decreased, at least if you take direction into view. Finally, high yield corporate bonds are turning higher, and once they catch breath even more, the all time highs already in sight would be conquered as smoothly as the 3,900 zone I delineated earlier.Gold Sector ExaminedVery mild upswing in both the gold miners and gold – along the lines of a daily consolidation with bullish undertones. This early in the precious metals upswing, miners are in the pool position, and their relative and gradually increasing strength has been visible since the early Mar days. So far so good here.Silver, Platinum and the RestSilver isn‘t yet outshining the rest of the crowd, and that‘s good, for it often tends to do so in the later stages of the precious metals sector advance. Within the coming precious metals advance, I continue to view silver outperformance as expected. Part monetary metal, part commodity, it‘s uniquely position to benefit. Its yesterday‘s setback is nothing to be concerned about as the gold, gold miners and platinum rebound keeps doing largely well.Comparing the gold miners to gold ($HUI:$GOLD) ratio to the silver miners to silver (SIL:$SILVER) ratio is returning a bullish snapshot of the current advance too. The beaten down gold sector is leading the charge, and the silver one will play catch-up in time.SummaryHaving reached the 3,900 zone, the S&P 500 is likely to consolidate the gains next. Due to the improving key markets (corporate bonds and tech), I am not looking for any this week‘s potential setback to turn the tide in this aging correction really.The gold upswing is proceeding, helped by the weakening dollar and ever so slightly retreating Treasury yields. After clearing the volume profile defined support at $1,720 and stretching a little below, the bulls next objective is the roughly $1,775 figure marking the Feb lows. Should that one be conquered, the odds of having seen gold bottom this Monday, would have dramatically increased.
Resting Stock Bulls and Gold Question Marks

Resting Stock Bulls and Gold Question Marks

Monica Kingsley Monica Kingsley 12.03.2021 16:12
Stock bulls went right for all time highs yesterday, clearing the 3,900 threshold in this correction – one that is in its very late innings indeed. But the preceding upswing has been sharp, and not all the internals support such a swift recovery, which is why I am still looking for consolidation to strike at any moment.We might be actually experiencing such a daily one right now, as today‘s premarket session has sent S&P 500 futures a few dozen points down. The big picture is though one of of the stock market getting used to rising rates, which are rising in reflection of the economic growth. But what about the snapback short-term rally in long-term Treasuries? It‘s not materializing as the instrument went down again yesterday – unconvincingly bobbing above recent lows. The defensive sectors such as consumer staples and utilities, reversed yesterday (at a time when technology rose), sending a warning that we‘re about to see higher rates again. Probably not happening as fast as through Feb, but still. Let‘s bring up my recent perspective on high rates, what they are exactly:(…) the „high rates“ we‘re experiencing currently, do not compare to the early 1980s, which underscores the fragility of the current monetary order. The Fed knows that, and it has been evident in the long preparatory period and baby steps in the prior rate raising and balance sheet shrinking cycle. The market will see through this, and the central bank would be forced to move to bring long-term rates down through yield curve control or a twist program, which would break the dollar, drive emerging markets, and not exactly control inflation – real rates would drop like a stone in such a scenario, turning around gold profoundly. But the market knows the Fed isn‘t getting ready to really do anything more than it does right now. Gold rebounded on Tuesday, and the rally took it above $1,730 but the daily reversal is concerning. As I wrote yesterday in the title, the gold bulls can‘t rest – but they are resting, and prices are back at the lower end of the $1,720 volume profile.Assessing the damage in the early stages of today‘s session will clarify whether the rally‘s dynamics are still intact, or not – regardless of today‘s headwinds. Silver isn‘t exactly at its strongest today, and we‘re likely to get soon into the session an idea about where miners‘ strength is. And it‘s more likely that it won‘t be anything to write home about.Let‘s recall my yesterday‘s words, and pick what‘s relevant to the metals:(…) While the Fed is prepping the markets for (temporary, they say) higher inflation readings, gold didn‘t react too bullishly to yesterday‘s mildly positive CPI data – just wait for PPI data which would reflect the surging commodity prices more adequately. At the moment, evaluating the strength and internals of precious metals rebound, is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.Commodities are likely to do well in this reflationary phase, and the same goes for its turn to inflation. With precious metals, much depends upon their discounting mechanism‘s timing – when would they start doubting the transitory inflation utterances.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe S&P 500 upswing continues in pretty much a straight line, and the frequency of upper knots raises the probability of a short-term reprieve. Yes, it‘s risk-on, but a little pause would be healthy. Credit MarketsHigh yield corporate bonds have moved higher yesterday, mirroring the S&P 500 advance. That‘s encouraging even though the high yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio is still visibly lagging behind stocks. The non-confirmation‘s seriousness has though decreased markedly over the two last sessions, pointing to improving internals of the upcoming stock market upleg.Technology and ValueTechnology has been rallying on decreasing volume, also demonstrating a prominent upper knot. If there is one sector where the coming S&P 500 consolidation would originate, it would be here. Value stocks held their own yesterday, in a nod to the high beta reopening trades. I am not looking for VTV to weaken distinctly here.Gold and YieldsThe gold upswing reversed intraday while long-term Treasuries (TLT ETF) hadn‘t really moved in their tight daily range. Erasing much of the overnight selling today, would be probably the most the bulls would be able to achieve today. But even that isn‘t the deciding factor to determine the fate of the recovery off the $1,670 area.Upswing in the BalanceGold miners are still painting a positive picture. They are outperforming gold while silver isn‘t spiking – the white metal is under even more pressure today than gold itself. So, the signs from miners and silver balance each other out to a degree. The whole sectors keeps hanging in the balance after yesterday‘s session. Each day or even hour the bulls don‘t utilize to reverse today‘s setback, is questioning the upswing continuation. Not much to add here as the daily momentum apprears shifting to the bears again.SummaryHaving conquered the 3,900 zone, the S&P 500 is likely to consolidate the gains next. The put/call ratio and volatility are at relatively lower readings, and the next setback for stocks would come from tech again. Not overly dramatic, but a brief challenge still.The gold upswing stalled, and its fate is being decided. Having fallen through the volume profile defined support at $1,720, the bulls objective is to recapture this zone. Tall order..
Gold and Stock Bulls Are Getting Ready

Gold and Stock Bulls Are Getting Ready

Monica Kingsley Monica Kingsley 15.03.2021 15:34
Now that stocks closed at new all time highs, the correction is officially over. And what little rest stock bulls could claim last week, arrived on Friday. Yet, the bull is strong enough to defend the 3,900 zone, and charge higher the same day.Who could be surprised, given the modern monetary theory ruling the economic landscape? The Fed amply accomodative, one $1.9T stimulus bill just in, and a $2T infrastructure one in the making. That‘s after the prior Trump stimulus, and who would have forgotten how it all started in April 2020? The old congressional saying „a billion here, a billion there, and pretty soon you‘re talking real money“, needs updating.Stocks are readying another upswing as the volatility index is approaching 20 again, and the put/call ratio shows complacent readings. The sectoral examination supports higher highs as tech has reversed intraday losses, closing half of the opening bearish gap. Value stocks naturally powered to new highs, with industrials, energy and financial performing best. Real estate keeps showing remarkable momentum, and has been among the best performers off correction‘s lows.These all have happened while long-term Treasury yields have broken to new highs. Are they stopping to be the boogeyman?As I‘ll show you, inflation expectations are rising – and the bond market is reflecting that. The market‘s discounting mechanism is at work, mirroring the future virtually ascertained CPI rise, if you look carefully into the PPI entrails. This inflation won‘t be as temporary as the Fed proclaims it would – but it still hasn‘t arrived in full force. We‘re merely at the stage of financial assets rising, because that‘s where the newly minted money is chiefly going.As regards gold, let‘s recall my Thursday‘s words:(…) At the moment, evaluating the strength and internals of precious metals rebound, is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe S&P 500 upswing took a little breath, and at the same time continued unchallenged. The path of least resistance simply remains higher. Credit MarketsHigh yield corporate bonds (HYG ETF) have declined, but don‘t give the impression of readying a breakdown. I understand it as a daily weakness, because the whole bond market was under pressure on Friday, with investment grade corporate bonds (LQD ETF) taking it on the chin as well. Russell 2000 and Emerging MarketsRussell 2000 keeps doing better than the 500-strong index, which is natural and expected given the prevailing investment themes doing well, value stocks rising, and euphoric speculation running rampant. Emerging market weakness needs to be viewed through the strains stronger dollar and rising rates cause abroad. That‘s why I am not viewing EEM underperformance as a warning sign for U.S. equity markets.Inflation Expectations and YieldsQuite a relentless rise in my favorite metric of forward looking inflation, isn‘t it? Treasury inflation protected securities to long-dated Treasuries (TIP:TLT) have been relentlessly rising off the corona crash lows, and their accent in 2021 has accelerated just as steeply as the nominal rates reflect (see below).Gold Upswing AnatomyGold refused the premarket losses, and has rebounded to close almost unchanged on the day. Is that sign of strength or weakness?The miners to gold ratio provides a clear answer, and it‘s a bullish one to open the week. Finally, the gold market is showing signs of life on a prolonged basis, which I started talking on Tuesday. Regardless of Friday‘s weakness in the yellow metal, it‘s so far so good as the miners keep leading the charge.Silver weakness in the course of the upswing isn‘t a too worrying sign – silver miners outperforming as well, is a more important signal. Smacks of broadening leadership in the unfolding precious metals upswing. SummaryThe consolidation of S&P 500 gains was and remains bound to be a short-term affair as the bulls take on new highs and surge well past them in the days and weeks ahead. The top is very far off as this still nascent recovery gets so much stimulus fuel that overheating becomes a very real possibility this year already.Gold has turned an important corner on Friday, and so have the miners – be they gold or silver ones. The precious metals upswing is unfolding, and decreased sensitivity to rising yields is a pleasant sight for the bulls. Well, that‘s exactly what I had been writing about transitioning to a higher inflation environment exactly one week ago.
Stock Bulls Run – Will Gold Ones Too?

Stock Bulls Run – Will Gold Ones Too?

Monica Kingsley Monica Kingsley 16.03.2021 15:37
Resting on Friday, surging on Monday. Feeble downswing attempt defeated right after the open, and then just bullish price action. Retail data today, and another FOMC meeting tomorrow – I view the former as not too likely to spoil today‘s market action. About the latter, remembering the latest reactions to Powell pronouncements, I look for the markets to be affected to a much greater degree.Don‘t look for material surprises, or be spooked by bets on the Fed tightening through dot plot adjustment or other forward guidance tools.I expect no change from what I wrote yesterday:(…) Who could be surprised, given the modern monetary theory ruling the economic landscape? The Fed amply accomodative, one $1.9T stimulus bill just in, and a $2T infrastructure one in the making. That‘s after the prior Trump stimulus, and who would have forgotten how it all started in April 2020? The old congressional saying „a billion here, a billion there, and pretty soon you‘re talking real money“, needs updating.Global liquidity isn‘t retreating exactly, emerging markets are building a solid base regardless of the dollar going higher two days in a row, and emerging market bonds are fighting to recover just as much as long-dated Treasuries. Coupled with the sectoral analysis, this is conducive for the unfolding stock market upswing and for commodities as well. We‘re still in a constructive environment for both, and I look within the latter at especially copper, nickel and iron to do well. Meanwhile, the precious metals upswing is going fine, and the miners keep outperforming – both gold and silver ones. The time for the bulls isn‘t running out, and the real battles will come once the gold bulls conquer the volume profile thin zone around $1,760. Will the bulls reach it on tomorrow‘s Fed underplaying the threat of inflation and showing tolerance to its overshoot? That‘s certainly one of the possibilities.The best course of action is to keep a pretty close eye on the metals – no bullish / bearish change from Thursday‘s words:(…) At the moment, evaluating the strength and internals of precious metals rebound, is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe S&P 500 upswing is ready to proceed further now, and slight volume hint tells me to look for higher prices today. Credit MarketsHigh yield corporate bonds (HYG ETF) continue trading in a weak pattern, which however hasn‘t been able to force the stock market down. And not that I looked at it to have a chance to. I continue to view the junk corporate bond market as under pressure in sympathy with investment grade corporate bonds and long-dated Treasuries, which scored modest gains yesterday too. It‘s a euphoric rush into stocks simply. VolatilityThe volatility index shows no signs of panic returning, and the put/call ratio is getting very complacent again. Doesn‘t look like the boat will capsize today really.Value Stocks and TechValue stocks (VTV ETF) repelled a daily downswing attempt, which is positive considering that technology (XLK ETF) rose more strongly. The leadership in the stock market advance is broadening, and that‘s good news for the bulls.Gold Upswing AnatomyGold added modestly to its recent gains, and would do well to clear the $1,730 area some more really. The low volume is a sign that current prices aren‘t attracting enough interest to step in, and either buy or sell. Given the below chart though, the initiative is still within the bulls.It‘s that the miners keep outperforming gold without really slowing down, and that‘s still what I like to see well before the upswing makes an intermediate top. The daily indicators remain far from extended. Will the bulls take advantage accordingly?Silver, Copper and OilSilver is consolidating and by no means outperforming, as it so often does at the very late stage of precious metals upswings. The deductive conclusion is that the days of the upswing aren‘t likely over just yet.Both copper and oil are consolidating within their bullish patterns, and today‘s downswing taking both down around 1.5% from yesterday‘s prices shown above, is taking them nearer to where I would increase weighting. Yes, I‘m bullish stocks and commodities still, and look for precious metals to be gradually joining in some more.SummaryAfter the brief consolidation of S&P 500 gains, we‘re again in the full upswing mode, and the credit markets aren‘t a show stopper. The stock market bull is alive and well, and deeper correction has been yet again delegated to the dustbin. The top is very far off as this still nascent recovery gets so much stimulus fuel that overheating becomes a very real possibility this year already.Gold keeps turning an important corner on, but the bulls could get more comfortable only with an upswing that clears the $1,730 zone now, given the strong performance mining indices are showing. Adding to that even more decreased sensitivity to rising yields would compound the pleasant sight for the bulls. The runup to tomorrow‘s Fed will be telling.
ECB Accelerates Its Asset Purchases. Gold Needs Fed to Follow Suit

ECB Accelerates Its Asset Purchases. Gold Needs Fed to Follow Suit

Finance Press Release Finance Press Release 16.03.2021 16:16
The ECB accelerated its asset purchases, but unless the Fed follows suit, gold may continue its bearish trend.On Thursday (Mar. 11), the European Central Bank decided to accelerate its asset buying under the Pandemic Emergency Purchase Program :Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.The decision came after a rise in the European bond yields that has mirrored a similar move in the U.S. Treasuries (see the chart below). Christine Lagarde , the ECB President, was afraid that increasing borrowing costs could hamper the economic recovery, so she decided to talk down the bond yields.Indeed, the growth forecasts for the EU have deteriorated recently amid the persistence of the pandemic and painfully slow rollout of the vaccines. According to the ECB, the real GDP of the bloc is likely to contract again in the first quarter of the year. So, the increase in the market interest rates could additionally drag down the already fragile economic recovery:Market interest rates have increased since the start of the year, which poses a risk to wider financing conditions. Banks use risk-free interest rates and sovereign bond yields as key references for determining credit conditions. If sizeable and persistent, increases in these market interest rates, when left unchecked, could translate into a premature tightening of financing conditions for all sectors of the economy. This is undesirable at a time when preserving favourable financing conditions still remains necessary to reduce uncertainty and bolster confidence, thereby underpinning economic activity and safeguarding medium-term price stability.Implications for GoldWhat does this all mean for gold prices? Well, the ECB’s move should prove rather negative for the price of gold , at least initially. This is because the loosening of the European monetary policy could weaken both the euro and gold against the U.S. dollar. Indeed, as the chart below shows, although the price of gold increased on Thursday, it declined one day later.Moreover, the acceleration in the ECB’s quantitative easing could further widen the divergence in the interest rates (that started rising in the third quarter of 2020, as one can see in the chart below) between the U.S. and the EU, which should also support the greenback at the expense of the yellow metal.On the other hand, the fact that the ECB has intervened in the markets – announcing acceleration in the pace of its asset buying program, after a certain rebound in the bond yields – could turn out to be positive for gold prices, at least in the long-run. This is because it shows how fragile the modern economies are and how dependent they have become on cheap borrowing guaranteed by the central banks.As I noticed earlier in the past, we are in the debt trap – and the central banks will not allow for the true normalization of the interest rates. The latest ECB’s action is the best confirmation that suppression of the real interest rates will continue, thus supporting gold prices. After all, the ECB has effectively put a cap on bond yields, introducing an informal yield curve control.So far, only the ECB has intervened in the markets, but other central banks could follow suit. This week, the Fed will announce its decision on the monetary policy. And we cannot exclude that the American central bank will also signal a more dovish stance to calm the turmoil in the bond markets and prevent further increases in the interest rates. One thing is certain: gold needs some fresh dovish hints from the Fed to go up. Unless the Fed further eases its stance, I’m afraid that gold will continue its bearish trend .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Squaring the Bets Prior to the Fed

Squaring the Bets Prior to the Fed

Monica Kingsley Monica Kingsley 17.03.2021 15:14
Barely visible, but still a red candle – does yesterday mark a turning point? Even the volatility index refused to decline further on the day, and the option traders increased their put allocations. Is this a real reason to be cautious, or it represents mere window dressing before the Fed?When it comes to the sectoral view, not much has really changed in the S&P 500. Technology rose yesterday but gave up all intraday gains. Value stocks appear ready for a breather, and financials, energy and industrials all declined. That doesn‘t bode extraordinarily well for today‘s session, but this is not the place to look at when it comes to trading today‘s markets.It‘s the long-term Treasuries that I am focused on the most. Still as extended as lately ever relative to their 50-day moving average, they‘re weighing heavily on the markets. Stocks have gotten used to their message of rising inflation and economic recovery as we‘re still in the reflation phase, and not in the inflation one – but it‘s the precious metals that are suffering here, showing best in the copper to 10y Treasury yield ratio.I am not looking for the Fed to act today by adjusting its forward guidance stance or language, or taking a U-turn on inflation. No, they‘ll maintain the transitory stance even though markets are transitioning to a higher inflation environment already. The Fed won‘t do much this time.My prior Monday‘s words ring true also today:(…) Inflation expectations are rising, but not galloping yet. What to make of the rising rates then? They‘re up for all the good reasons – the economy is growing strongly after the Q4 corona restrictions (I actually expect not the conservative 5% Q1 GDP growth, but over 8% at least) while inflation expectations are lagging behind. In other words, the reflation (of economic growth) is working and hasn‘t turned into inflation (rising or roughly stable inflation expectations while the economy‘s growth is slowing down). We‘re more than a few quarters from that – I fully expect really biting inflation (supported by overheating in the job market) to be an 2022-3 affair. As regards S&P 500 sectors, would you really expect financials and energy do as greatly as they do if the prospects were darkening?So, I am looking for stocks to do rather well as they are absorbing the rising nominal rates. And this still translates into yesterday‘s throughts:(…) Global liquidity isn‘t retreating exactly, emerging markets are building a solid base regardless of the dollar going higher two days in a row, and emerging market bonds are fighting to recover just as much as long-dated Treasuries. Coupled with the sectoral analysis, this is conducive for the unfolding stock market upswing and for commodities as well. We‘re still in a constructive environment for both, and I look within the latter at especially copper, nickel and iron to do well. For gold, the key question remains whether copper upswings will outpace any yield increases on the long end, which have moderated their increases in Mar compared to Feb. That‘s good but not nearly enough given that even gold afficionados have come to expect lower prices lately quite en masse. Sign of capitulation off which the upswing was born? Yes, and the key questions now are whether we‘re seeing a pause, or a top in the upswing, and whether the next selling pressure would break below the $1,670 zone or not – see my early March game plan. The volume profile thin zone around $1,760 appears out of reach for now, without a Fed catalyst. I don‘t look for the central bank to invite any speculation on when the next rate hike might come (forget Brazil‘s example). They might not even talk about bringing down rates at the long end through a twist program. I certainly don‘t look for clues as to increasing the $120bn monthly pace of monetary injections. Unless the market perceives the Fed as underplaying the threat of inflation and showing tolerance to its palpable overshoot, the overall mix of positions and conference statements might bring gold under renewed pressure as it meanders a little below $1,730 as we speak.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe S&P 500 upswing took another daily breather yesterday in the end, and the volume doesn‘t send clear signals either way. Consolidation followed by new highs appears though the most likely scenario.Credit MarketsAfter quite some time, stocks are trading at very elevated levels relative to the high yield corporate bonds to short-term Treasuries (HYG:SHY) ratio. Now, it‘s three days in a row that the latter doesn‘t confirm the stock market upswing. The bulls better be cautious here over at least a few sessions as the latest historical evidence shows that Fed pronouncements haven‘t been accompanied by fully risk-on moves exactly.Let‘s not forget the big picture, and that‘s of the stock market rising at the expense of debt instruments. Please note how little has the early Mar correction achieved in denting the S&P 500 appeal. The stock market bull is alive and well, very well actually.Gold in the StraitsGold still remains resilient to rising yields, but its inability to rally convincingly is worrying for the bulls. After all, this $1,730 zone shouldn‘t have been any real obstacle after three days of the rally, yet the yellow metal had to rise from the dead on Friday to fight another day. And given that it hasn‘t progressed since, it makes me think the bulls are hanging around for a remotely possible Fed surprise only.It‘s only the miners that are kind of still positive here. Yet, even their upswing was challenged yesterday, but that was on low volume. And that‘s constructive for the bulls when it comes to interpreting yesterday‘s events.The lack of silver outperformance before the sellers take over, is another sign why the upswing might not be over just yet. Still, these are just secondary clues, for nothing is more bullish than rising prices, which is what we obviously haven‘t seen in the metals much really.Key Ratio SpeaksWhile not tracking each other as closely as lately, the copper to 10y Treasury yield is sending an ominous signal still. The key question is whether long-dated Treasuries rise, or gold falls – I am not looking for copper to deviate from the current steeply rising trajectory much.SummaryS&P 500 is again entering daily consolidation mode, justifying my decision to take some of the prior profits off the table earlier today. While the Fed won‘t likely deliver real surprises later today, the credit markets are flashing warning signs more noticeably than yesterday. Still, the stock market bull is very far from making a top.Gold is being increasingly more challenged and stuck in the $1,730 zone, instead of clearing it.The yellow metal awaits today‘s Fed pronouncements, and barring a dovish(ly perceived) surprise, it looks ready to give up a portion of recent gains. All eyes on long-term Treasuries remains the battle cry.
Reversing the Fed Moves?

Reversing the Fed Moves?

Monica Kingsley Monica Kingsley 18.03.2021 15:22
Fed messaging was rightfully interpreted as dovish – full employment is in effect its single mandate now. Yes, the central bank will tolerate higher inflation, and has prepped the markets for its advent (as if these didn‘t know already). Powell managed to walk the fine line between economic optimism, pushback on the idea of raising rates or taper, and yet implicitly acknowledged the growing liquidity concerns with one little, gentle prod. Markets naturally liked the tone, overlooking no mention of action on rising yields, and stocks, metals and commodities turned positive on the day – quite strongly so. The dollar declined visibly as long-term Treasuries recovered intraday losses on high volume. Highly charged finish to the day, but today‘s analysis will show that little has actually changed in its internals. Rates are rising for the good reason of improving economy and its outlook, reflation (economic growth rising faster than inflation and inflation expectations) hasn‘t given way to all out inflation, and stocks with commodities remain in a secular bull market. We‘re in the decade of real assets outperforming paper ones, but that will become apparent only much later into the 2020s.So, the central bank confirmed my yesterday‘s assessment of its tone and Treasuries take:(…) I am not looking for the Fed to act today by adjusting its forward guidance stance or language, or taking a U-turn on inflation. No, they‘ll maintain the transitory stance even though markets are transitioning to a higher inflation environment already. The Fed won‘t do much this time.They might not even talk about bringing down rates at the long end through a twist program. I certainly don‘t look for clues as to increasing the $120bn monthly pace of monetary injections. Unless the market perceives the Fed as underplaying the threat of inflation and showing tolerance to its palpable overshoot, the overall mix of positions and conference statements might bring gold under renewed pressure as it meanders a little below $1,730 as we speak.Long-term Treasuries … are weighing heavily on the markets. Stocks have gotten used to their message of rising inflation and economic recovery... – but it‘s the precious metals that are suffering here, showing best in the copper to 10y Treasury yield ratio.For gold, the key question remains whether copper upswings will outpace any yield increases on the long end, which have moderated their increases in Mar compared to Feb. That‘s good but not nearly enough given that even gold afficionados have come to expect lower prices lately quite en masse. Sign of capitulation off which the upswing was born? Yes, and the key questions now are whether we‘re seeing a pause, or a top in the upswing, and whether the next selling pressure would break below the $1,670 zone or not – see my early March game plan. The volume profile thin zone around $1,760 appears out of reach for now, without a Fed catalyst.And while we got a good confidence building one yesterday, I don‘t see it as strong enough to power precious metals higher immediately. It‘s nice that gold is decoupling from the rising yields but I view its upswing as demanding on current and future patience. Gold miners are still showing the way, and will be a key barometer in telling whether today‘s premarket downswing in antidollar, risk-on plays is a meaningful turn or not. For now, the renewed long-term Treasury yield increases (and tech selloff to a degree) point to reemergence of lingering Fed doubts.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe upper knot in the S&P 500 upswing spells short-term caution. The chart posture would be stronger without it, but at the same time, the volume and candle itself aren‘t ones of reversal. The most likely outcome of upcoming sessions still appears as resumption of the prior grind higher, which is in line with my yesterday‘s message of consolidation followed by new highs as the most likely scenario.Credit MarketsThe long upper knot in the high yield corporate bonds to short-term Treasuries (HYG:SHY) ratio shows that the bond market isn‘t on board with the Fed – at a time when stocks aren‘t panicking in the least. Given the big picture in the economy and the combo of monetary and fiscal policy initiatives, I look for this to be a storm in the tea cup when it comes to (higher future) stock prices, and I am keenly on the lookout for possible deterioration in the corporate bond markets as relates to the S&P 500.Technology and ValueThe tech upswing wasn‘t really convincing, but it‘s been value stocks‘ turn to drive higher S&P 500 prices. No change in dynamic here. It‘s however the relation to not as strong Russell 2000 or emerging markets yesterday that hints at headwinds in stocks for today. A play on patience, again.Inflation ExpectationsYesterday‘s Fed message gave no reason for these to decline, and prior uptrend continues unabated. Bond yields haven‘t though frontrunned them yesterday, which I however look to see changed today.Precious MetalsThe gold ETF formed a bullish candle, tracking the rising miners well. But likewise to the HYG:SHY ratio‘s upper knot message, this one is concerning as well. The key question is about the staying power of GDX outperformance – the key argument for the gold market character having changed with the Mar 08 bottom, which might very well be THE bottom, and not a local one. The decoupling of the yellow metal from rising yields is even more visible now than when I first showed you the weekly $GOLD - TLT overlay chart two weeks ago.Platinum goes down while the copper engine runs (and silver did join in yesterday). This chart sends a message of short-term indecision extending to other commodities, including oil. SummaryS&P 500 is in my view merely testing the buyers‘ resolve, and doesn‘t want to turn the consolidation on declining VIX into a rush to the exit door. Despite the surprisingly early turn against the Fed day move, this doesn‘t represent a trend change or arrival of the dreaded steep correction. The stock market bull is very far from making a top.Gold is again under pressure today, back in the $1,730 zone instead of having cleared it. Understandable given the dollar and Treasuries reversal of yesterday‘s Fed moves, but not rushing to the downside head over heels.
Gold & the USDX: Correlations

Return of the Rising Yields

Finance Press Release Finance Press Release 19.03.2021 14:47
March Madness started on Thursday (Mar. 18), but stocks got the jump on their own brackets this week. Let’s dive in.Although Wednesday (Mar. 17) saw the indices have a nice St. Patrick’s day green reversal thanks to Jay Powell babying us on inflation thoughts again, Mr. Market isn't stupid. Manic, but not stupid. We saw a return to the strong rotation trend out of growth stocks the day after Powell's testimony (Mar. 18).Thursday (Mar. 18) saw bond yields surge to their highest levels in what seems like forever. The 10-year yield popped 11 basis points to 1.75% for the first time since January 2020, while the 30-year rate climbed 6 basis points and breached 2.5% for the first time since August 2019.Predictably, the Nasdaq tanked by over 3% for its worst session in 3-weeks.Jay Powell and bond yields are the most significant market movers in the game now. Get ready for the market next week when he testifies to Congress. That'll be a beauty. What's coronavirus anymore?So after what's been a relatively tame week for the indices, we can officially say bye-bye to that.Bond yields, though, are still at historically low levels, and the Fed Funds Rate remains at 0%. With the Fed forecasting a successful economic recovery this year, with GDP growth of around 6.5% -- the fastest in nearly four decades -- the wheels could be in motion for another round of the Roaring '20s.The problem, though, is that the Great Depression came right after the first Roaring '20s.Many are sounding the alarm. However, like CNBC's Jim Cramer, others think the current headwinds are overblown, and a mirror of the 2015-2016 downturn is based on similar catalysts.Figure 1: Jim Cramer TwitterCramer argued that Powell is a talented central banker willing to "let the economy continue to gain strength so that everyone has a chance to do well."Nobody can predict the future, and these growth stock jitters from rising bond yields may be overblown. But for now, it's probably best to let the market figure itself out and be mindful of the headwinds.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:There is optimism but signs of concern. The market has to figure itself out. A further downturn is possible, but I don’t think that a decline above ~20%, leading to a bear market, will happen any time soon.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Nasdaq- Another Buyable Dip?Figure 2- Nasdaq Composite Index $COMPThe last time I switched my Nasdaq call to a BUY on Feb 24 , that worked out very well. I will use the same criteria again for the Nasdaq as the market figures out bond yields: The RSI and the 13000 support level. I need the Nasdaq’s RSI to dip below 40 while also falling below 13000 before buying.We’re not quite there. This is an excellent dip, but it’s really only one down day and its worst down day in weeks. I think we may have some more buying opportunities next week if bond yields pop due to Jay Powell’s testimony. I mean, it seemingly always happens after he speaks.Pay very close attention to the index and its swings.If the tech sector takes another big dip, don’t get scared, don’t time the market, monitor the trends I mentioned and look for selective buying opportunities. If we hit my buying criteria, selectively look into high-quality companies and emerging disruptive sub-sectors such as cloud computing, e-commerce, and fintech.HOLD, and let the RSI and 13000-support level guide your Nasdaq decisions. See what happens over subsequent sessions, research emerging tech sectors and high-quality companies, and consider buying that next big dip.For an ETF that attempts to correlate with the performance of the NASDAQ directly, the Invesco QQQ ETF (QQQ) is a good option.For more of my thoughts on the market, such as a potentially overbought Dow Jones, small-caps, inflation, and emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Breaking the Spell of Rising Yields

Breaking the Spell of Rising Yields

Monica Kingsley Monica Kingsley 19.03.2021 15:00
Markets didn‘t buy into the Fed messaging, and quite a few moves were reversed. Stocks declined, commodities got under pressure, and oil took it on the chin. Long-dated Treasuries plunged again as the dollar reversed Wednesday‘s losses. Overall picture is one of nervousness as the Fed‘s statements and their consistency are getting a second look. Plus, triple witching can exaggerate today‘s trade swings, getting reversed in subsequent sessions too.The greatest adjustment is arguably in the inflation projections – what and when is the Fed going to do before inflation raises its ugly head in earnest. There is still time, but the market is transitioning to a higher inflation environment already nonetheless. In moments of uncertainty that hasn‘t yet turned into sell first, ask questions later, let‘s remember the big picture. Plenty of fiscal support is hitting the economy, the Fed is very accomodative, and all the modern monetary theory inspired actions risk overheating the economy later this year. As I wrote yesterday:(…) Rates are rising for the good reason of improving economy and its outlook, reflation (economic growth rising faster than inflation and inflation expectations) hasn‘t given way to all out inflation, and stocks with commodities remain in a secular bull market. We‘re in the decade of real assets outperforming paper ones, but that will become apparent only much later into the 2020s.The largely undisturbed rise in commodities got checked yesterday just as stocks did, but the higher timeframe trends (technical and fundamental drivers) hadn‘t changed, which will be apparent once the dust settles. As I‘ll lay out in today‘s analysis, the gold market is springing back to life, and the precious metals upswing rationale is still very much on the table, and the decoupling from rising nominal yields goes on – I view yesterday‘s selloff in the miners as partially equity markets driven.Bottom line, I made good decisions to subscribers‘ benefit by closing profitable stock market positions before the downswing hit, and not writing off gold.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookOrderly downswing yesterday that wouldn‘t stand out on the chart in a few weeks really. The only stunning thing about it is how soon after Wednesday‘s FOMC it came. Yet, this chart isn‘t sending signals of a key reversal just in.Credit MarketsThe non-confirmation in the high yield corporate bonds to short-term Treasuries (HYG:SHY) ratio caught up with the 500-strong index yesterday. Is a new downtrend starting here? While high yield corporate bonds for the all the Treasuries market turmoil haven‘t arguably bottomed yet, the degree to which they can pull stocks down still, is an open question. Conversely, once HYG swings higher again, stocks would get on a firmer footing.Technology and ValueThe tech sold off again, and the interest-rate sensitive defensives (utilities, consumer staples and REITs) suffered yesterday. Yes, even the sharply recovering real estate sector did. Coupled with value stocks giving up intraday gains, the stock market internals have (not insurmountedly, but temporarily) deteriorated.Gold and SilverGold not following the declining TLT path is the most important green shoot within the market. The yellow metal held up very well in yesterday‘s selling pressure across the board, and not even gold miners (viewed through a $HUI overlay or $HUI:$GOLD ratio) gave up on the upswing – more downside price action in the latter would have to come today to cast real doubts.Weekly chart examination of essentially equivalent metrics (enriched with the key copper ingredient) shows clearly the PMs decoupling stage – silver cast off the shackles still in 2020 while gold is doing so now. It‘s still early on in the process, but invalidating excessively bearish targets – gold has the benefit of my doubt, until I call that one off. I don‘t think that would happen today.Crude OilThe one-way trip starting in Nov met its largest downswing yesterday, signifying we better get used to oil no longer moving in one direction only. Amid the reports of excess stockpiles and European lockdowns denting the demand, OPEC+ is keeping up with the production cuts, undermined largely by Iranian exports only. But look how little has the oil index ($XOI) declined – it‘s relative position shows the excessive nature of yesterday‘s move. In my view, oil would be rangebound once it bottoms, before breaking higher again. The world economy is improving, leading indicators are rising, and the only fly in the ointment are yields, and a stronger dollar pressuring emerging markets. The forces of reflation, liquidity and demand growth will outweigh this unfolding, temporary setback. SummaryS&P 500 is once again experiencing downswing, yet the VIX hasn‘t truly spiked – and neither has the put/call ratio. While there is no stampede to the exit door, the market internals have deteriorated, and may take more than a few sessions to get repaired. For one, tech is again in the driving seat.Gold has been quite resilient lately, and yesterday‘s developments also outside of the bonds arena are boding well for the $1,670 bottom hypothesis. Especially given the hints presented above, and that stock market weakness coupled with safe haven play attraction, might help here further.
Silver, simple and effective

Silver, simple and effective

Korbinian Koller Korbinian Koller 21.03.2021 10:12
Why we find Silver to be the number one hedge towards an uncertain future, an excellent investment to make stellar returns, and a simple way to protect your wealth is as follows:Precious metals have a history of perfect risk mitigation of a portfolioPrecious metals have an intrinsic tangible commodity value if held in physical formSilver is the underdog in its sector, needing to catch up with gold, providing for an additional edgeSilver is trending (now in a consolidation period – and within this consolidation strong – after a potent first trend leg up)Fundamental facts point overwhelmingly towards a strong Silver demandSilver is in the public eye, the news, creating demand in various investor and consumer classesActual proof of demand outweighing supply through the now consistently for a year divergence between spot and physical acquisition price for Silver (a 35% difference at the moment).Monthly Chart of Gold/Silver-Ratio, The turbo edge:Gold-Silver ratio, monthly chart as of March 18th, 2021.A look at the monthly chart of the Gold/Silver-Ratio above shows that historically price violations of the 40 moving average result in a move much more closer towards a median zone. Imbalance, principle-based, returning to balance. This, even with the most moderate early area of a 43.50 level (our studies show a reasonable likelihood of a value of 18), provides a turbo stack-able edge for a Silver purchase. These additional boosters for a higher likelihood of success of your investment make all the difference.  Silver in US-Dollar, Weekly Chart, A healthy trend:Silver in US-Dollar, weekly chart as of March 18th, 2021.The weekly chart of Silver shows that even though the last six months were one of consolidation for Silver prices, within that consolidation, there was consistent follow-through of strength for direction. You can make this out by eyeballing price within this sideways period (after the stellar advance from March 2020 to August 2020) creeping upward on the blue midline for the linear regression channel. Strong volume node price support at US$25 is now substantiated by holding through the Fed announcement this week. Consequently providing good support and low risk for more physical Silver acquisition.Weekly Chart, Silver in US-Dollar, Silver, simple and effective:Silver in US-Dollar, monthly chart as of March 18th, 2021.The last 50 years on a monthly Silver chart bring to light that Silver can move for substantial distances. These bull trends live above the 100-moving average. The bears have their upper hands below this average line. Silver jolted out of a six-year bear range cycle far above the 100-moving average. Consequently, probability is now on the side for Silver investors. That with quite some upside potential for the long run. We feel confident that Silver sees new all-time highs in the not-so-distant future and most likely three-digit figures not too far out as well.Silver, simple and effective:A mistake here and there is human. If you miss an entry once in a while, that’s fine. But right now, we see a tendency of hope replacing sound wealth preservation strategy. A typical move of the subconscious when exposed for too long to a stressful situation. A hopeful mindset is not a good point of origin for investing. Emotional states aren’t the best investment advisors. The future is far from clear may this be fiscal or monetary, political or economical. A simple and effective way right now is what is needed to get grounded. Consequently, finding oneself on an emotionally sound foundation to operate from.Feel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.By Korbinian Koller|March 18th, 2021|Tags: Gold, low risk, Silver, silver bull, Silver Chartbook, technical analysis, time frame, trading principles|0 CommentsAbout the Author: Korbinian KollerOutstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Tide Is Turning in Stocks and Gold

Tide Is Turning in Stocks and Gold

Monica Kingsley Monica Kingsley 22.03.2021 13:51
Friday‘s session ended in a tie, but it‘s the bears who missed an opportunity to win. Markets however dialed back their doubting of the Fed, which has been apparent in the long-term Treasuries the most. One daily move doesn‘t make a trend change likely though, especially since the Mar pace of TLT decline is on par with Feb‘s and higher than in Jan. While Treasuries paused in early Mar, they‘re now once again as extended vs. their 50-day moving average as before.And that poses a challenge for interest rate sensitive stocks and to some degree also for tech - while I expect value to continue to lead over growth, technology would recover some of the lost ground on rates stabilization. And it‘s true that the $UST10Y move has been a very sharp one, more than tripling from the Aug 2020 lows.Inflation expectations are rising, and so is inflation – PPI under the hood thus far only. Financial assets are rising, perfectly reflected in (this month consolidating) commodity prices. Cost-driven inflation is in our immediate future, not one joined at the hip with job market pressures – that‘s waiting for 2022-3. The story of coming weeks and months is the stimulus avalanche hitting while the Fed still merrily ignores the bond market pressures.And stocks are going to like that – with tech participating, or at least not standing too much in the way, S&P 500 is primed to go to new highs rather shortly. Given the leadership baton being firmly in the hands of value, smallcaps are likely to outperform the 500-strong index over the coming weeks and months. The volatility index is confirming with its general downtrend, commodities, including oil, will be the 2021+ place to be in – just see how fast is Thursday‘s steep correction being reversed. I‘ll be covering black gold more often based on popular demand, so keep your questions and requests coming!The precious metals upswing goes on, and landed the yellow metal comfortably above $1,740. Not too spectacular, but the miners are still painting a bullish picture. I view the increasing appeal of the yellow metal (alongside the bullish sentiment hitting both Wall and Main Street) as part of the inflation trades, as decoupling from rising yields which increased really fast. As gold is arguably the first asset to move in advance of a key policy move, it might be sensing the Fed being forced (i.e. the markets betting against the Fed) to moderate its accomodative policy. Twist, taper – there are many ways short of raising the Fed funds rate that would help put pressure off the sliding long-dated Treasuries, not that these wouldn‘t be susceptible to move higher from oversold levels. And just like the yellow metal frontrunned the Fed before the repo crisis of autumn 2019, we might be seeing the same dynamic today as well.For the cynical and clairvoyant ones, we might sit here in 3-6 months over my notes on „the decoupling that wasn‘t“ - all because rates might snap back from the current almost 1.8% on the 10-year bond.For now, my Friday‘s words remain valid also today:(…) The greatest adjustment is arguably in the inflation projections – what and when is the Fed going to do before inflation raises its ugly head in earnest. There is still time, but the market is transitioning to a higher inflation environment already nonetheless. In moments of uncertainty that hasn‘t yet turned into sell first, ask questions later, let‘s remember the big picture. Plenty of fiscal support is hitting the economy, the Fed is very accomodative, and all the modern monetary theory inspired actions risk overheating the economy later this year. Rates are rising for the good reason of improving economy and its outlook, reflation (economic growth rising faster than inflation and inflation expectations) hasn‘t given way to all out inflation, and stocks with commodities remain in a secular bull market. We‘re in the decade of real assets outperforming paper ones, but that will become apparent only much later into the 2020s.The largely undisturbed rise in commodities got checked yesterday just as stocks did, but the higher timeframe trends (technical and fundamental drivers) hadn‘t changed, which will be apparent once the dust settles.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and InternalsFriday‘s session on understandably high volume and with some intraday volatility, closed with prices little changed. While the daily indicators are weakening, I see that as a temporary move that would be followed by higher highs in the index.Market breadth indicators are largely constructive, attesting to the broad base of the current S&P 500 advance. Even on little changed days such as Friday, both the advance-decline line and advance-decline volume have risen. I wouldn‘t be concerned with the weak new highs new lows here much as the sectoral structure remains positive – both technology (XLK ETF) and value stocks (VTV ETF) have rejected further intraday declines.Credit MarketsHigh yield corporate bonds have turned higher, and so did their ratio to short-dated Treasuries (HYG:SHY). This is a positive factor for further gains in stock prices.Smallcaps and Emerging MarketsThe Russell 2000 (IWM ETF) isn‘t flashing any warning signs, and continues performing as robustly as the 500-strong index. Given the stage of the bull market we‘re at, smallcaps can be expected to start outperforming at some point in the future, just the same way their underperformance was over since early Nov. As regards emerging markets, their base building accompanied with Friday‘s upswing when faced with rising yields and solid dollar, is encouraging.Gold and SilverThe gold upswing is progressing along, and the daily consolidation in the miners (GDX ETF) isn‘t an issue when compared to a stronger gold performance. Friday was also characterized by a bigger upswing in the junior miners (GDXJ ETF) than in the seniors (GDX ETF), which is positive. The overall impression is of GDX readying a breakout above late Jan and early Feb lows, which bodes well for the precious metals sector as such next – especially given that this decoupling is happening while nominal yields aren‘t truly retreating.Both silver and platinum continue their base building while copper, the key ingredient within the copper to Treasury yields ratio, keeps bullishly consolidating. Silver miners aren‘t sending signals of underperformance, which means that the precious metals upswing dynamics remain still healthy on a closing basis. As regards premarket silver weakness, putting it into context with other markets is key – thus far, it‘s the odd weak one, so I am not jumping to conclusions yet.SummaryS&P 500 trading was undecided on Friday, yet didn‘t bring any clues invalidating the bullish outlook. Volatility remains low, but the put/call ratio has risen, even without a corresponding downswing (or danger of seeing one). The Fed doubting induced pullback appears more than likely in its closing stages.Gold had another resilient week, and the precious metals upswing examination bodes well for the move higher to still continue. Miners are leading, and the yellow metal keeps breaking the spell of higher Treasury yields, supported by copper not yielding ground either.
Powell Sounds Dovish, but Is He Dovish Enough for Gold?

Powell Sounds Dovish, but Is He Dovish Enough for Gold?

Finance Press Release Finance Press Release 23.03.2021 16:13
Although dovish, Powell downplayed the bond yield rally. The Fed’s more tolerant stance on inflation is good for gold, but the metal may continue its bearish trend in the short-term.In the last edition of the Fundamental Gold Report, I analyzed the latest FOMC statement on monetary policy and economic projections . Today, I would like to focus more on Powell’s press conference . My reading is that the Fed Chair sounded like a dove. First of all, he emphasized several times that the jump in inflation this year will be only transient , resulting from the base effects and rebound in spending as the economy continues to reopen. And Powell explicitly stated that the US central bank will not react to this rise in consumer prices (emphasis added):Over the next few months, 12-month measures of inflation will move up as the very low readings from March and April of last year fall out of the calculation. Beyond these base effects, we could also see upward pressure on prices if spending rebounds quickly as the economy continues to reopen, particularly if supply bottlenecks limit how quickly production can respond in the near term. However, these one-time increases in prices are likely to have only transient effects on inflation (…) I would note that a transitory rise in inflation above 2 percent, as seems likely to occur this year, would not meet this standard [i.e., the Fed’s goals of maximum employment and stable prices].Second, Powell also pointed out that we are still far, far away from reaching the Fed’s employment and inflation goals. So, investors shouldn’t expect any hikes in the interest rates or any taper tantrum anytime soon. He was very clear on that, saying that it’s not yet time to start talking about tapering, and that the Fed will announce well in advance any decision to taper its quantitative easing program. Indeed, in a response to the question “is it time to start talking about talking about tapering yet”, he said:Not yet. So, as you pointed out, we’ve said that we would continue asset purchases at this pace, until we see substantial further progress. And that's actual progress, not forecast progress. (…) We also understand that we will want to provide as much advance notice of any potential taper as possible. So, when we see that we’re on track, when we see actual data coming in that suggests that we're on track to perhaps achieve substantial further progress, then we'll say so. And we'll say so well in advance of any decision to actually taper.Third, the Fed Chair reiterated a few times that the Fed’s changed its approach and it will not react to the forecast progress, but only to the actual progress , stating that:the fundamental change in in our framework is that we’re not going to act preemptively based on forecasts for the most part. And we’re going to wait to see actual data (…) And we’re committed to maintaining that patiently accommodative stance until the job is well and truly done.It makes some sense, of course, but it also increases the risk that the Fed’s response to rising inflation will be delayed. The same stance was adopted in the 1970s, when the central bankers believed that they would have plenty of time to react to any dangerous increases in consumer prices. But such an approach resulted in inflation getting out of control, leading to great stagflation . Gold shined then.Implications for GoldWhat does this all mean for the gold prices? Well, latest Powell’s remarks were dovish, which should support the yellow metal. But, as the chart below shows, we don’t see such a support reflected in the gold prices (London P.M. Fix).Part of the problem is that the bond yields continued to rise, after a short pullback amid the FOMC statement, exerting further downward pressure on the gold prices. A related issue here is that although Powell sounded generally dovish , he expressed a relaxed view on the current rally in the interest rates. Indeed, when replying to a question on the bond selloff, Powell just said that “we think the stance of our monetary policy remains appropriate”. So, his comments imply that the bond yields have room to move further up in the near-term, thus hurting the price of gold .However, there is certainly a level of interest rates that would be uncomfortable for the Fed (and Treasury), forcing it to intervene more decisively in the financial markets, and we’re not necessarily far from this level. Furthermore, given the rising inflation and inflation expectations, the real interest rates should rise at a slower pace than the nominal yields, and if they do actually fall, they would support the price of gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Why Retreating Yields Don‘t Lift All Boats

Why Retreating Yields Don‘t Lift All Boats

Monica Kingsley Monica Kingsley 24.03.2021 15:09
Stocks declined but won‘t they run higher next? Tuesday‘s downswing changed precious little, and the Congressional testimony was a non-event. The key happening was in long-dated Treasuries, which rose yet again – the much awaited rebound is here, and brings consequences to quite a few S&P 500 sectors.The index is likely to advance, but the engine is going to be tech this time – not value stocks. I view this as a deceptive, fake strength in the bull market leadership passing over to value inevitably next. That‘s why I expect the S&P 500 advance to unfold still, a bit rockier than it could have been otherwise. This will hold true for as long as TLT is at least somewhat rising:(…) technology would recover some of the lost ground on rates stabilization. ...the $UST10Y move has been a very sharp one, more than tripling from the Aug 2020 lows.Technology though declined yesterday, and so did value stocks. Many markets went through selloffs yesterday, among commodities most notably oil. While nothing has substantially changed, we got a serious whiff of risk-off environment, pertaining precious metals too.Especially concerning was the miners underperformance, given that none of the moves indicated accumulation within the sector. Reason number two to expect PMs short-term vulnerability was ignorance of retreating yields that stretches a bit further below what can be viewed as a run of the mill PMs upswing correction. A short-term crack in the TLT decoupling dam that can still be reversed even though it doesn‘t look likely at the moment – better not to wave it off it though.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookRegardless of yesterday‘s setback, the outlook in stocks hasn‘t changed. Once the current corrective move is over and value reassumes leadership, expect the gains to be more pronounced than what we would experience rather shortly.Credit MarketsBoth high yield corporate bonds (HYG ETF) and investment grade corporate bonds (LQD ETF) moved higher, and in the latter, the upswing was backed by a rising volume. The bond markets are coming back into favor, taking a little luster off the stock market appeal on the daily basis.Nowhere is yields influence better seen than in financials (XLF ETF), which give the impression of expecting futher retreat in yields, and haven‘t thus far reached any meaningful support. That would provide headwinds to the S&P 500 advance, especially as it translates into other cyclicals.Gold and SilverGiven the above chart, my yesterday‘s words ring even truer seeing Tuesday‘s closing prices:(…) Similarly to Mar 12, the precious metals upswing is being challenged – miners (GDX ETF) are underperforming. Today‘s session will tell whether we‘re witnessing consolidation, or a renewed rollover to the downside, the chances of which have risen yesterday.The bearish turn is just as visible in silver and silver miners, and it would be premature to declare it a bullish divergence. Given that silver bulls didn‘t attempt a rebound, and volume isn‘t consistent with capitulation, the risks to the downside materially increased.Precious Metals and CopperThe full precious metals sector got under serious pressure yesterday, and so did copper. Given the upswing having rolled over to the downside yesterday (especially when viewed through $HUI:$GOLD metrics), the bulls have to prove themselves through a stronger action than a dead cat bounce.SummaryS&P 500 upswing has better prospects of continuing than not, and the volatility and put/call ratio readings confirm we aren‘t in for a true setback really. The stock bull market is far from having made a top, and will continue grinding higher.Gold and silver decline going hand in hand with even weaker miners, means that the upswing was effectively ended – the only thing that can bring it back, is renewed miners outperformance and expected alignment of the yellow metal to Treasury yield moves, which is absent at the moment.
Powell and Yellen Sound Upbeat. Don’t They Like Gold?

Powell and Yellen Sound Upbeat. Don’t They Like Gold?

Finance Press Release Finance Press Release 25.03.2021 14:40
Both Powell and Yellen testified before Congress. They sounded upbeat on the U.S. economy, but gold’s reaction was weak.What a combo! Both Fed Chair Jerome Powell and the U.S. Treasury Secretary Janet Yellen testified before Congress this week. They spoke about the economic response to the economic crisis caused by the Covid-19 pandemic and the Great Lockdown .In his prepared remarks , Powell sounded rather hawkish , as he noted that “the recovery has progressed more quickly than generally expected and looks to be strengthening.” As well, during the Q&A session, the Fed Chair seemed to be very confident about the economy and the central bank’s monetary policy . In particular, Powell told senators that 2021 was “going to be a very, very strong year in the most likely case.”He also downplayed worries about higher inflation expressed by some lawmakers, arguing that the environment of low inflation we have observed for years before the epidemic won’t change anytime soon:We think the inflation dynamics that we’ve seen around the world for a quarter-century are essentially intact — we’ve got a world that’s short of demand, with very low inflation. We think those dynamics haven’t gone away overnight, and won’t.And Powell dismissed concerns about the supply disruptions as well, saying that “a bottleneck, by definition, is temporary”.In a sense, Powell is right. A lot of supply disruptions are short-lived. But there are more inflationary factors operating right now, to name just a surge in the broad money supply . So, I’m afraid that he might be too conceited and understated the risk of higher inflation. You know, a lot of economic trends last – until they don’t. I’m referring here to the fact that the macroeconomic conditions change not gradually but rather abruptly. Inflation may remain low as long as inflation expectations are well-anchored, but if they become unanchored, inflation may rise quickly.Importantly, Powell was also unmoved by the recent rally in the bond yields :Rates have responded to news about vaccination, and ultimately, about growth (…) In effect there’s been an underlying sense of an improved economic outlook (…) That has been an orderly process. I would be concerned if it were not an orderly process, or if conditions were to tighten to a point where they might threaten our recovery.Yellen also sounded rather hawkish in her prepared remarks , as she wrote that “we may see a return to full employment next year.” Yellen also admitted that asset valuations are high, but that she wasn’t worried about financial stability, nevertheless: “I’d say that while asset valuations are elevated by historical metrics, there’s also belief that with vaccinations proceeding at a rapid pace, that the economy will be able to get back on track”. However, she argued that economy needed more help to recover fully.Importantly, Yellen admitted that higher taxes would be likely needed to raise revenues for increased government spending: “But longer run, we do have to raise revenue to support permanent spending”. Tax hikes could be negative for Wall Street and the economy, and thus, supportive for the price of gold.Implications for GoldWhat do Powell and Yellen’s testimonies imply for the gold prices? Well, the two most important economic figures in the U.S. didn’t surprise the markets, so the yellow metal reacted little to their statements, as the chart below shows.However, as both Powell and Yellen sounded rather optimistic about economic growth this year, their remarks might prove negative for the yellow metal. What can be particularly bad for gold is Powell’s calm stance regarding the rising bond yields. Of course, he could just put a good face on higher interest rates , but gold would prefer a more dovish stance. However, gold’s lack of a larger bearish reaction to rather upbeat testimonies from Powell and Yellen can actually be taken as an optimistic symptom. Anyway, a more accommodative stance of the Fed would be very helpful for the yellow metal.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Have Commodities Peaked?  We doubt it

Have Commodities Peaked? We doubt it

Chris Vermeulen Chris Vermeulen 25.03.2021 19:47
While everyone was paying attention to the FOMC, Gold & Silver, and the Treasury Yields, it appears the recent commodity rally trend took a big hit on Thursday, March 18, 2021.  Our guess is that the FOMC statement did nothing to support the continued commodity price rally as the US Fed continued with near-zero interest rates and economic support through 2023.  The rally in commodities was likely based on expectations of a much stronger economic recovery as the COVID vaccines take the pressure off economic shutdowns and further restrictive economic conditions, but that may not be the case.Commodities Rollover May Be Misleading TradersThe rollover in commodities suggests the markets are reacting to renewed expectations, post-FOMC.  They may continue to consolidate near support (near $16.30) before attempting to move higher as traders digest the Fed comments and fall back into economic recovery expectations.  Any move below $16.00 as seen on the chart below may likely prompt a consolidation phase within historical support channels (see the Weekly DBC chart below).Commodities Attempting to Base Near SupportThe following weekly DBC chart shows how the COVID-19 event collapsed commodity prices and how they've just recently rallied back to levels above the pre-COVID price range – above $15.00. When we start to look at longer-term trends, we start to see a number of key price levels that become important technical factors related to future trends.  The support levels that setup in 2019, pre-COVID, are still very valid current support levels for commodities.  If a continued economic recovery takes place, DBC will likely find support above $15 and then begin another rally phase targeting prices above $19 to $20.  This current rollover in commodity prices may be nothing more than a pause in price before another rally starts.Commodities Break Major Monthly Price ChannelLastly, looking at the Monthly DBC chart, below, highlights the very long-term price trends and what becomes immediately evident is that price has recently broken above the RED downward sloping price channel line. The momentum of the price rally that recently broke this downward price channel was strong enough to pierce this downward sloping channel – and it would not be uncommon for price to pause after this price breach.  The YELLOW support levels, from the weekly DBC chart, continue to confirm the $15 to $16 as active support.  Any price rotation or pause near this level will likely hold within this support range before attempting another move higher.Be sure to sign up for our free market trend analysis and signals nowso you don’t miss our next special report!We targeted price lows from 2012~2014 as a potential upside price target if the rally phase continues.  After breaking the major downward sloping price trend, it is very likely that once DBC prices rally above $18.50, a continued rally phase may target the $25 price level with an extended run over many months.Historically, a rally in commodities does not always prompt a rally in the US major indexes.  In 2007~08, commodities rallied extensively while the US stock market collapsed.  In 2010~11, commodities rallied as the US stock market rallied more than 27%.  In 2016~2018, commodities rallied as the US stock market rallied more than 62%.  The current breakout above the RED longer-term price channel suggests we may see a stock market rally aligned with a commodity price rally based on the recent comments by the US Fed.  Unless a major credit market or other catastrophic event takes place, we believe this upward trend in commodities may prompt an extended recovery rally in both commodities and the US stock market.Don’t miss the opportunities to profit from the broad market sector rotations we expect this year, which will be an incredible year for traders of my Best Asset Now (BAN) strategy.  You can sign up now for my FREE webinar that teaches you how to find, enter, and manage positions for maximum profits from only those sectors that have the most strength and momentum. Staying ahead of sector trends is going to be key to success in volatile markets, and this year we see a change in leading sectors taking place from what they were last year.For those who believe in the power of trading sectors that show relative strength and momentum but don’t have the time to do the research every day, let my BAN Trader Pro newsletter service do all the work for you with educational daily market video, updates, research, and my trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist, which ranks the hottest ETFs, which is updated daily for my subscribers.Happy Trading!
Is Silver the New Gold?

Is Silver the New Gold?

Finance Press Release Finance Press Release 26.03.2021 14:30
Many analysts expect silver to outperform gold this year. It’s possible, but investors shouldn’t count on improving economic conditions and industrial demand.Silver has recently become a hot investment theme. For months, if not years, some analysts claimed that silver is undervalued relative to gold. Then, at the beginning of 2021, Reddit revolutionaries tried to trigger a short squeeze in silver. Although that attempt failed, silver has, so far, clearly been outperforming gold this year , as the chart below shows. So, is silver now a better investment than gold?Well, why would it be? After all, many investors buy silver for the same reasons that they purchase gold – it’s a rare, monetary metal which may be used as an inflation hedge , a safe-haven asset against tail risks , or a portfolio diversifier . It’s just cheaper than gold – and this is why it’s often called the poor man’s gold.Indeed, silver has a very high positive correlation with gold . Just take a look at the chart below, which illustrates the movement of gold and silver prices since April 1968. The shapes of the lines are very similar and the correlation coefficient is as high as 0.90!On the other hand, silver may indeed outperform gold. After all, silver has a dual nature. It is not only a monetary asset – like gold – but also an industrial commodity. This implies that silver is more business cycle -sensitive than gold. Therefore, given that the global economy is recovering from the deep recession caused by the coronavirus pandemic and the Great Lockdown , silver may outperform gold. In other words, although both gold and silver could benefit from reflation during the recovery, improving economic conditions could support the latter metal more .Another argument for silver shining brighter than gold in 2021 is the historical pattern according to which silver prices tend to follow gold prices with some lag, just to catch up with them later – often overreacting compared with gold’s behavior.So much for theory. Let’s move on to the data now and analyze the previous economic crisis , i.e., the Great Recession , and the following recovery. As the chart below shows, both metals moved generally in tandem, however, silver was more volatile than gold .For example, from its local bottom in mid-2007 to its local peak in early 2008, silver rose 79 percent, while gold “only” 57 percent. Then, in the first phase of the global financial crisis , silver plunged 58 percent (from $20.92 to $8.88), while gold slid 30 percent (from $1011.25 to $712.5). Subsequently, silver skyrocketed 448 percent, reaching a peak of $48.7 in April 2011. Meanwhile, the price of gold reached its peak of $1875 a little bit later, in September 2011, gaining 166 percent. Finally, silver plunged 46 percent by the end of 2011, while gold dropped only 19 percent. This shows that the economic recovery and industrial revival that followed the Great Recession didn’t help silver to shine. Actually, the bluish metal underperformed gold .Similarly, silver plunged more than gold (25 versus 17 percent) in the run-up to the burst of the dot-com bubble , as one can see in the chart below. It also gained less than gold in the aftermath of the 2001 recession (25.4 versus 27.5 percent), and then it plunged in the third quarter of 2002, significantly underperforming gold.Therefore, the recent history doesn’t confirm the view that silver should be outperforming gold in the early stages of a recovery, because it’s an industrial commodity that benefits from improving economic conditions. Silver was never in a bullish mode when gold was in a bear market, and it rather tends to rally rapidly in the late stage of the commodity cycle, like in the 2000s.Actually, one can argue that silver has the best period behind itself. After all, it soared 141 percent from late March to September 2020, while gold rallied “only” 40 percent. So, it might be the case that the catch-up period, in which silver outperforms gold, is already behind us. Indeed, as the chart below shows, the gold-to-silver ratio has recently declined to a more traditional range of 60-70.This, of course, doesn’t mean that silver cannot rise further. However, it seems that the metal has already caught up somewhat with its more precious cousin . So, it’s possible that silver can outperform gold in 2021, as Biden’s focus on renewable energy may help silver – as a major part of the metal used in industry is now linked to solar panels and electronics, but history teaches us that investors shouldn’t count on industrial demand . Silver didn’t outperform gold during recoveries from the previous recessions. Although silver has a dual nature, its price is highly correlated with gold prices. Therefore, macroeconomic factors, such as the U.S. dollar , real interest rates , risk appetite, inflation , public debt , monetary policy , fiscal policy , etc., should have a stronger impact on silver than industrial demand . As always, those entering the silver market should remember that silver price movements are more violent than in the gold market.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Gold & the USDX: Correlations

How To Spot Boom and Bust Cycles

Chris Vermeulen Chris Vermeulen 29.03.2021 16:04
One of the most important aspects of trading is being able to properly identify major market cycles and trends. The markets will typically move between four separate stages: Bottoming/Basing, Rallying, Topping/Distribution, and Bearish Trending.  Each of these phases of market trends is often associated with various degrees of market segment trending as well.  For example, one of the most telling phrases of when the stock market is nearing an eventual Topping/Distribution phase is when the housing market gets super-heated.  Yet, one of the most difficult aspects of this Excess Phase rally trend is that it can last many months or years, and usually longer than many people expect.Until Gold Really Starts To Rally, Expect A Continued Rally In The Stock MarketWhen an Excess Phase rally is taking place in the stock market, we expect to see the Lumber vs. Gold ratio moving higher and typically see the RSI indicator stay above 50.  Demand for lumber, a commodity necessary for building, remodeling, and other consumer essential spending, translates well as an economic barometer for big-ticket consumer spending. Extreme peaks in this ratio can often warn of a pending shift in consumer spending and how the stock market reacts to an Excess Phase Peak.  Let's take a look at some of the historical reference points on this longer-term Weekly Lumber vs. Gold chart below.First, the 1992 to 2005 ratio levels represent a moderately low Gold price level compared to a somewhat inflated Lumber price level.  You can see how that dramatically changed between 2005 and 2012 – this was a time when Gold started a historic rally phase just before the Housing/Credit crisis of 2008-09.Since that time, the Lumber to Gold ratio has stayed below historical low reference points (near 0.6).  This shift in the Lumber to Gold ratio suggests that demand for Gold outpaced demand for Lumber over the past 10+ years.  Now, the Lumber to Gold ratio is climbing back to levels near or above that 0.6 level and may soon move higher if the post-COVID economic recovery continues while demand for Gold stays somewhat muted.Traders need to pay attention to this current rally in the Lumber vs. Gold ratio because a breakout rally above the 0.60 level would likely mean a continued rally phase for the US stock market and strong sector trending related to consumer spending, housing, and speculative sectors.  Whereas, a failure to rally above the 0.60 level at this stage may indicate that the US stock market will begin to stall and potentially move into a sideways correction before starting a new trend.Be sure to sign up for our free market trend analysis and signals nowso you don’t miss our next special report!Lastly, we have drawn some Std Deviation channels on this longer-term Lumber to Gold Weekly chart above.  It is very important to understand that a continued rally in the Lumber to Gold ratio will break above the upper downward sloping channel from the 1999 peak and potentially prompt a big upside price rally – likely pushing the US stock market to extended new highs.A Closer Look At The Current SetupWhen we zoom into the current price trends on the following Lumber to Gold ratio chart below, we can clearly see the two recent rally trends; the first after the 2016 US elections and the second after the COVID-19 bottom.  The most important aspect of this chart right now is that any continued rally in the Lumber to Gold ratio may quickly breach the 0.60 historical range and potentially prompt a very big rally in the US stock market over the next few months.The new COVID stimulus and the continued efforts to pass an Infrastructure Bill in the US Congress may prompt enough of a capital injection into the US economy to set off a “booster phase” rally at this stage in the economic recovery.  One simply can't rely on the fact that the Lumber to Gold ratio is near a historically critical level, we need to actually wait to see confirmation of a breakdown in this trend before we can say what is likely to happen in the near future.  If the ratio climbs above 0.60 and continues to rally higher, then it is very likely that the US and Global stock market trends will also continue much higher.Historical Peaks & Rallies – When To Be ConcernedThis longer-term Lumber to Gold ratio chart shows how the SPY continued to rally through various stages of the rally in the ratio level. We also have to remember the peak in 2000 was related to two important economic events; the DOT COM bubble burst and the 9/11 terrorist attacks.  Subsequently, the breakdown in the Lumber to Gold ratio that started in 2004 was related to a broadly weakening housing market trend – prompted by an ever-increasing Fed Funds Rate which began in 2004-05.  Currently, we have the US Fed promising “near-zero” rates through 2022 and an easy money policy throughout that time to support stronger global market recovery.  Barring any unforeseen credit, economic, or global market event, we believe a breakout rally in the Lumber to Gold ratio, assuming Gold stays below $2250 and does not enter a breakout rally phase, will coincide with a moderately strong US stock market rally.When should you start to be concerned that a top is setting up based on this ratio?Very simply put, when you see Gold start to rally above $2150~$2250 and breakout into a true rally while the price of Lumber begins to fall somewhat sharply, then we believe traders should start to actively protect positions and prepare for a bigger breakdown in the stock market trend.  Until Gold starts to react as a proper hedge, this speculative “excess phase” rally will likely continue higher.As a warning for all our friends and followers, a breakdown of this upside rally trend could be sudden if a major market event takes place.  For example, if a sudden collapse in the credit/debt markets were to happen (related to risk exposure or bank/financial firm failures), then we may see a very sudden breakdown in this ratio.  Additionally, if war or geopolitical economic tensions break out where excessive global risks become a factor, then we may also see this ratio turn negative quickly.Traders need to understand the potential for a continued stock market rally near these current levels is quite strong, but there are still risks of a sudden breakdown in trending.  The question that nobody can answer is “what will the catalyst event be and when could it happen?”. Until then, trade the hottest sectors using my Best Asset Now strategy, which you can learn NOW by signing up for my FREE webinar that will teach you how to find the best sectors to trade.Until the end of the trend is upon us, get ready for some really interesting global market trends and sector opportunities.  It is very likely that volatility will stay higher than normal prompting 2% to 4%+ rotations in market trends.  These next few years are going to be a trader's dream market in terms of trending and price rotation. For those who believe in the power of trading sectors that show relative strength and momentum but don’t have the time to do the research every day, let my BAN Trader Pro newsletter service do all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my BAN Trader Pro subscribers.Enjoy your Sunday!
Bitcoin is invaluable

Bitcoin is invaluable

Korbinian Koller Korbinian Koller 30.03.2021 08:27
In fact, Bitcoin is a decentralized global digital network which in essence is transforming analog assets into digital assets. It has been growing at 200% a year. Now after 12 years in existence Bitcoin is a digital trillion-dollar network.What supports its long-term stability is that its decentralization and transparency are immune against policy. While we typically at the mercy of policymakers and as such a middleman that can manipulate the use of a payment method, with Bitcoin, the individual is genuinely safe. Looking at the world around us where it is hard to find any field not infiltrated by groups who seek to take advantage, manipulate, and flat out lie, it is a true need one can trust a store of value to benchmark against.BTC-USDT, Daily Chart, Our chart from last week’s chartbook:Bitcoin in US Dollar, daily chart as of March 23rd, 2021.We posted the above short to midterm chart prediction in our last week’s chartbook publication.BTC-USDT, Daily Chart, As anticipated-another leg up:Bitcoin in US Dollar, daily chart as of March 29th, 2021.The market unfolded quite as planned. BTC-USDT, Weekly Chart, Health and sustainability:Bitcoin in US Dollar, weekly chart as of March 29th, 2021.If we analyze Bitcoin prices advancing from last August’s lows, we can find an intact Elliot impulse wave pattern. The Health and sustainability of this trend are derived from the three propulsion proportions. While advancing strongly in the first wave with a 323 % advancement, the pace cooled down to a 99% second leg upward. These stunning advancements followed yet again by a more moderate increase of 44% to its recent all-time highs. This abstinence of a blow-off top or run-away train allows us to believe that prices could march higher.BTC-USDT, Weekly Chart, Bitcoin is invaluable, Projections:Bitcoin in US Dollar, weekly chart as of March 29th, 2021.When examining projections, we like to stack odds by looking at both a time and a price component. The above chart shows this blend using a time cycle approach (vertical lines) and a Fibonacci extension probability measurement. Stacking these projection tools would lead us to a price target near ninety-seven thousand for the mid-next year. Our “conservative” projection is marked with the yellow circle on the top right of the chart.Bitcoin is invaluable:Looking around, and you will find that the Dollar is what around the world most value storage is bench-marked against. It seems frightening to us since the Dollar has no gold standard or otherwise intrinsic value that we still give it this much power only based on a belief. With economic powers shifting towards the east and a lack of political and economic leadership, beliefs can change, and as such, currency stability is endangered. Hedging your store of value through an instrument that holds intrinsic value based on principles over beliefs seems more than logical.Feel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.By Korbinian Koller|March 30th, 2021|Tags: Bitcoin, Bitcoin correction, Bitcoin mining, crypto analysis, crypto chartbook, crypto mining, low risk, quad exit, technical analysis, trading education|0 CommentsAbout the Author: Korbinian KollerOutstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Liquidity Boost for Stocks and Gold?

Liquidity Boost for Stocks and Gold?

Monica Kingsley Monica Kingsley 30.03.2021 15:53
Friday‘s great run gave way to yesterday‘s consolidation, and stock bulls appear in need of more before taking out the psychological 4,000 mark. The Archegos crash isn‘t causing contagion fears the way GameStop in late Jan did. The current volatility and put/call ratio simply doesn‘t reflect that.The theme is still one of reflation – while inflation expectations are rising, and so are the inflation data for those who care to examine them closely enough, true inflation isn‘t yet here with us. Markets are merely transitioning to a higher inflation environment already, not buying the Fed‘s transitory explanation. Commodities are basing at the conquered levels before another run higher.Make no mistake though, the current S&P 500 upswing is heavily reliant on the defensive sectors – technology isn‘t standing in the way, utilities and consumer staples are doing great, and so are several areas within the real estate sector such the residential one, or REIT ETFs that can be expected to keep doing well. Couple that with value stocks not really retreating, and you get the current view of S&P 500 advance structurally.Credit markets though are a little lagging behind – thanks to the return of rising yields, working its predictable magic on investment grade corporate bonds as well. Such were my points from yesterday‘s extensive analysis, diving into the big picture across the markets and the economy:(…) With 10-year Treasury yields at 1.67%, last week‘s decline didn‘t reach far before turning higher. Remembering stock market woes the first breach of 1.50% caused, stocks have coped well with the subsequent run up – while in the old days of retirees actually being able to live off interest rate income, a level of 4% would bring about trouble for S&P 500, now the level is probably just above 2%. Yes, that‘s how far our financialized economy has progressed – and I look for volatility to rise, and stocks to waver and likely enter a correction at such a bond market juncture. As always, I‘ll be keeping a close eye on the signs, emerging or not, as we approach that yield level.The bond market isn‘t merely anticipating an economic recovery that has good chances of overheating still this year, it‘s also reacting to:(…) the fresh money avalanche, activist fiscal and moterary policy to hit the markets as a tidal wave. Modern monetary theorists‘ dream come true. Unlike during the Great Recession, the newly minted money isn‘t going to go towards repairing banks‘ balance sheets – it‘s going into the financial markets, lifting up asset prices, and over to the real economy. So far, it‘s only PPI that‘s showing signs of inflation in the pipeline – soon to be manifest according to the CPI methodology as well.Any deflation scare in such an environment stands low prospects of success. Continuing:(…) For deflation to succeed, a stock market crash followed by a depression has to come first. And as inflation is firing on just one cylinder now (asset price inflation not accompanied by labor market pressures), it isn‘t yet strong enough to derail the stock bull run. The true inflation is a 2022-3 story, which is when we would be likely in a full blown financial repression and bond yields capped well above 2% while inflation rate could run at double that figure. Then, the Fed wouldn‘t be engaged in a twist operation, but in yield curve control, which the precious metals would love, for they love low nominal and negative real rates.As I wrote on Twitter, it‘s a question of time when gold starts anticipating the policy turn, snifffing it out just like the Fed having to abandon hawkish positions of late 2018, or the runup to the repo crisis of autumn 2019. We got quite a few decoupling signs, some on prolonged basis, but gold isn‘t yet leading commodities the way it did both before and after the corona deflationary shock. Let‘s not forget about the currencies and arbitrage opportunities there – the yen carry trade is still very much alive, making it a no brainer to borrow in declining currency while parking the proceeds elsewhere – and the one-way trading in $USDJPY in 2021 is a fitting testament thereof. A powerful argument against deflation on our doorstep, by the way.Quite to the (deflationary shock) contrary at the moment – both commodities and precious metals are under pressure in today‘s premarket session. Another undoing of the miners‘ outperformance?Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookDaily consolidation on average volume – no hinting at serious troubles down the road. Buy the dip mentality still rules the day.Credit MarketsHigh yield corporate bonds (HYG ETF) chart looks a bit tired to the upside – the bulls had to defend against a serious downswing yesterday first. Contracting volume precedes rising volume, and the best the bulls can hope for, is sideways trading coupled with downswing rejection followed by another move higher.Technology and ValueTechnology (XLK ETF) repelled an intraday downswing while value stocks (VTV ETF) merely couldn‘t keep up all the gained ground during the day. So far so good in the run up or base building on the path to new all time highs.Gold in the SpotlightThe daily resilience in the miners would come under heavy pressure today, and GDX can be expected to close lower. Would they still show outperformance vs. the yellow metal? I wouldn‘t bet the farm on it – it appears the Mar 04 game plan will be tested soon instead.Miners to gold (black line) still keeps painting a bullish picture on the weekly chart, as it refuses to follow the yellow metal to the downside. Where would it be should the $1,670 support zone get tested again – would that level be sufficient enough to power a rebound?Silver, Miners and CopperSilver clearly illustrates the sectoral weakness – the selling waves get harder to repel, and upswing attempts are happening on lower volume. While copper goes sideways, the white metal is breaking lower, and its miners aren‘t showing any strength at all.SummaryS&P 500 keeps consolidating Friday‘s gains without signs of upcoming, groundbreaking weakness. With volatility at around 20, the path of least resistance remains overall higher – until tech says no more. Again, no hint at that today still.Gold is again approaching the $1,670 support, and miners‘ performance will send as valuable clues just as before the Mar 08 bottom. Given today‘s downswing, that will be an even more important indication, bearing medium-term consequences as well.
Has Gold “Ever Given” to You?

Has Gold “Ever Given” to You?

Finance Press Release Finance Press Release 30.03.2021 17:01
Neither the Suez Canal blockade nor the SLR exemption’s expiration should significantly affect gold, whose price is likely to be soon shaped by other factors.Do you think you’ve had a bad day? If yes, then imagine the helmsman of the Ever Given who somehow managed to get his giant container ship stuck in the Suez Canal, disrupting global trade and causing economic damage worth millions of dollars each hour. Sure, the blockade won’t sink the global economy (pun intended), but it won’t help it either. After all, the Suez Canal is the gateway between Europe and Asia, through which around 12-13% of world trade flows, as does 30% of the world's daily shipping container freight. So, every day of obstruction disrupted the movement of goods worth about $9 billion, having a significant impact on global trade.Of course, the world won’t end, and ships can always choose an alternative route around the Cape of Good Hope at the southern tip of Africa, but this route takes several days longer. So, the blockade has significantly delayed the consignments of goods and fuel, and exacerbated the already pandemic-disturbed supply channels. As a reminder, there are shortages of containers, semi-conductors, and other inputs and finished goods, that have significantly lengthened delivery times and pushed prices up. Although the blockade of the Suez Canal was temporary, it added additional disruption on top of existing supply problems. Meanwhile, the central banks and governments interpret everything as demand problems that need to be addressed through easy monetary policy and loose fiscal policy .The accident of the Ever Given won’t significantly impact gold prices. And, as the chart below shows, we haven’t seen any substantial effects so far.However, the blockade could remind investors (if they somehow managed to forget amid the pandemic ) that black swans exist and fly low, and it’s reasonable to have a portion of one’s investment portfolio in safe havens such as gold (for instance, the insurance part of the portfolio ). Additionally, the upward pressure on prices (although limited) could strengthen the appeal of gold as an inflation hedge , especially considering that officially reported inflation is likely to jump next month because of the low base effect and all the recent supply disruptions.Fed Allows for Expiration of SLRAnd now for something completely different. The Federal Reserve Board announced that the temporary change to its supplementary leverage ratio , or SLR, for bank holding companies will expire as scheduled on March 31. What does this mean for the U.S. economy and the gold market?The SLR is a regulation that requires the largest U.S. banks to hold a minimum level of capital. The ratio says how much equity capital the banks have to hold relative to their total leverage exposure (3% in the case of large banks and 5% in the case of top-tier banks). To ease strains in the Treasury market during the Covid-19 epidemic , the Fed temporarily excluded the U.S. Treasuries and central bank reserves from the calculation. In other words, banks could increase their holdings of government bonds and central bank reserves without raising equity capital.But now, with the exemption expired, their equity capital will be calculated again relative to the banks’ total leverage exposure, including Treasuries and central bank reserves. So, it might be the case that the banks will have to either increase the amount of equity (which is rather unlikely) or reduce the amount of government bonds. And if they sell Treasuries, it would add to the upward pressure on the bond yields . This would prove rather negative for gold, which is a non-interest-bearing asset.However, it doesn’t have to be the case. I mean here that the U.S. eight large and systematically important banks wouldn’t fall below their 5% regulatory minimum. Actually, they are said to have a roughly 25% buffer above minimum thresholds, so the expiry of the SLR exemptions doesn’t have to significantly affect the functioning of the Treasury market, at least not immediately. Hence, the impact of the expiration of the SLR exemption could have limited effect on the gold market , if any.It seems that the price of the yellow metal will be rather shaped by the real interest rates , the U.S. dollar, inflation, the level of confidence in the U.S. economy, etc. In the short-term, the focus on economic recovery could continue the downward pressure on gold prices, but in the long-term, the stagflation theme could resurface and push the price of the yellow metal up.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Intraday Market Analysis – Moving Resistance

Intraday Market Analysis – Moving Resistance

John Benjamin John Benjamin 31.03.2021 07:54
EURUSD capped by bearish moving averages The US dollar continues to advance across the board supported by improving economic outlook. After a short pause along the 20 and 30-hour moving averages, the sell-off renewed below 1.1760. A further drop below the psychological level of 1.1700 could drive the price towards 1.1600, a critical support level for the ten-month-long rally on the daily chart. As the RSI falls into the oversold area, a limited rebound could be met with selling pressure between the moving averages and 1.1775. NZDUSD weighed by bearish MA cross The New Zealand dollar is still struggling near its five-week lows as the appetite for growth-sensitive currencies fades. The kiwi has had a timid rally after the RSI went sharply into an oversold situation. It was probably due to profit-taking rather than fresh dip-buying. Buyers’ failure to hold onto 0.7000 suggests a lack of commitment after the daily chart showed a bearish MA cross. 0.6940 is the immediate support and a bearish breakout could trigger a new wave of sell-off towards 0.6900. XAGUSD sees limited bounce Silver slipped again amid rising long-term US yields as holding the precious metal would incur a higher opportunity cost. The price has retreated to January’s low at 24.00. Profit-taking from short-term traders may help lift bids while an oversold RSI recovers into neutrality. However, sentiment would remain bearish as long as the price stays below 24.80. Trend followers are likely to sell into strength in case of a rebound near the moving averages. A drop below 23.60 could trigger an extended sell-off into the 22s.
Tax Hikes are Coming

Tax Hikes are Coming

Finance Press Release Finance Press Release 31.03.2021 15:54
End of the month and first quarter of 2021. Is time going fast or slow? Markets have been moving at a dizzying pace to start the year.As a side note, this will be our last newsletter for this week because the market is closed on Friday (Apr. 2).The first quarter of 2021 is officially almost finished. Time flies when you’re having fun, right? While a broad correction did not happen by now, as I expected, the Nasdaq did enter correction territory twice since February. Despite the Nasdaq’s muted moves on Tuesday (Mar. 30), it’s right on the edge of its third foray into correction territory.The market themes remain. There is still as much uncertainty for tech stocks today as there were at the start of March. Until there’s some clarity on inflation and bond yields, I can’t foresee this ending anytime soon.Consider this too. President Biden is about to unveil a $2 trillion infrastructure plan during Wednesday’s session (wasn’t it supposed to be $3 trillion?). While this is great for America’s crumbling infrastructure, let’s be honest- does this economy, while recovering, need anymore spending?Plus, how do you think he will pay for this? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. The market may have priced in a lot of optimism. It may have already priced in some pessimism from potential inflation. But one thing it has not priced in is a possible tax hike.This concerns me.Rising bond yields + Rising taxes= A double whammy of bad news for tech stocks.However, despite the “what ifs,” for now, three pillars remain in motion as a strong backdrop for stocks:VaccinesDovish monetary policy full of stimulusFinancial aidMy goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:The market has to figure itself out.More volatility is likely, and we could experience more muted gains than what we’ve come to know over the last year. Inflation, interest-rate worries, and the potential for tax hikes should be the primary tailwinds. However, a decline above ~20%, leading to a bear market, appears unlikely for now.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Russell 2000- Time to Pounce?Figure 1- iShares Russell 2000 ETF (IWM)The climate right now supports the Russell 2000. The current economic policy is tailor-made for small-caps. The best part, though? The Russell is still very buyable.I kicked myself for not calling BUY on the Russell after it saw a minor downturn during the second half of February. I wasn’t going to make that mistake again.After the iShares Russell 2000 ETF (IWM) went on its latest rally to start March, I checked out the chart. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25, dropped below its 50-day, and I switched the call to a BUY.Now, as we start the final week in March, we may be looking at the 6th reversal after dipping below its 50-day. The IWM has been up about 3% since March 24.Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.Consider this too. The Russell is on track for its first losing month in almost five months. According to the chart, it may have also found double-bottom support.Based on macro-level tailwinds, its first losing month in five, potentially finding double-bottom support, its RSI, and where it is in relation to the 50-day moving average, I feel that this is a solid time to BUY.For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold & the USDX: Correlations

Stocks, Gold and the Troubling Yields

Monica Kingsley Monica Kingsley 31.03.2021 16:03
Yesterday‘s consolidation in stocks was a bullish one, and the S&P 500 upswing has good prospects of proceeding unimpeded. Strange but true if you consider that also a plan to considerably raise taxes would be announced today, so as to help pay for the stimulus wave. The bond markets are calmly overlooking that so far, enabling the run to the 4,000 mark.And it still appears a question of time. Inflation isn‘t yet biting (forget about the German CPI data for now), fresh money keeps hitting the markets, and Archegos is about to become a distant memory. Stocks seem immune to the rising yields spell at the moment, meaning that value trades can remain at elevated levels while technology is stuck in no man‘s land and defensives are consolidating recent sharp gains (consolidating until the rising yields come back with vengeance).And there is little reason given the Fed‘s stance why they shouldn‘t. Much of the marketplace is buying into the transitory inflation story, and inflation expectations aren‘t yet running too hot. As the economic growth is stronger than current or future inflation, we‘re still at a good stage in the inflation cycle – everyone benefits and no one pays.When such reflation starts to give way to decreasing or stagnant growth rates accompanied by rising inflation metrics, the stock market performance stops being as positive as it had been since the Mar 2020 bottom. At such a time, the current transitioning to a higher inflation environment would be at a very different (commodity prices) stage, and so would the bond yields (no longer well below 2% on 10-year Treasuries).Points made in my Monday‘s extensive analysis, ring true also today:(…) With 10-year Treasury yields at 1.67%, last week‘s decline didn‘t reach far before turning higher. Remembering stock market woes the first breach of 1.50% caused, stocks have coped well with the subsequent run up – while in the old days of retirees actually being able to live off interest rate income, a level of 4% would bring about trouble for S&P 500, now the level is probably just above 2%. Yes, that‘s how far our financialized economy has progressed – and I look for volatility to rise, and stocks to waver and likely enter a correction at such a bond market juncture. As always, I‘ll be keeping a close eye on the signs, emerging or not, as we approach that yield level.Gold isn‘t yet sensing the coming Fed intervention – similar to Europe or Australia, the central bank would have to take aim at the long end of the curve in earnest – yield curve control I raised mid-Feb already, as twist wouldn‘t be enough at that stage. Look for a full fledged financial repression and deflation standing no chance then – boon to all real assets, a time when gold would truly shine.For now though, Fed‘s credibility isn‘t being questioned and challenged in the markets. Bond yields are rising in an orderly fashion – if you can consider the 2021 run as orderly. I can‘t but I am not calling the shots at the Fed either so as to highlight the record 2021 TLT price extension below its longer-term moving averages. The unchallenged USD/JPY exchange rate shows that the yesterday mentioned yen carry trade is running hot:(…) making it a no brainer to borrow in declining currency while parking the proceeds elsewhere – powerful argument against deflation on our doorstep, by the way.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookStocks consolidated in a bullish fashion, and the stage is set for an upswing next. I see it as merely a question of time, and the early reaction to non-farm employment change, is neutral – look for the key Friday figure though.Credit MarketsHigh yield corporate bonds (HYG ETF) underperformed yesterday as both the investment grade corporate bonds and long-dated Treasuries rose. The HYG daily volume shows that this upswing isn‘t a done deal yet.Russell 2000 and Emerging MarketsWhile the 500-strong index is basing, both smallcaps (IWM ETF) and emerging markets (EEM ETF) attempt a turn higher. See how elevated $SPX remained vs. the two – it‘s clear the current upswing is a defensive one.Gold in the SpotlightGold miners weren‘t able to repeat their Monday‘s feat exactly, but aren‘t plunging faster than gold either. Sending inconclusive signals, is the takeaway – unless you step back and look at exactly the same weekly chart, which reveals miners comfortably outperforming the yellow metal. Be still ready for a coming test of my Mar 04 game plan, though.Gold with the overlaid copper to 10-year Treasury yield ratio (black line) shows that in the current (consolidation) phase of the commodities bull run, gold has lost its luster with yesterday‘s upswing. Again, how fast and from what level would it regain its footing, is the key question - $1,670 or not.Silver, Platinum and CopperSilver selling pressure unfortunately still dominates as the volume shows. White metal is in the straits much more than copper or platinum, which are merely going sideways (just as oil is).SummaryS&P 500 keeps consolidating Friday‘s gains without signs of upcoming, groundbreaking weakness. With volatility moving down again, the path of least resistance is still up – and tech isn‘t saying no.Gold is again in the proximity of the $1,670 support, and miners‘ performance will send as valuable clues just as before the Mar 08 bottom. Nothing convincing to draw conclusions either way at the moment.
Stock ATHs and Gold Double Bottom

Stock ATHs and Gold Double Bottom

Monica Kingsley Monica Kingsley 01.04.2021 15:25
Bullish run in stocks that lost steam before the close – does that qualify as a reversal? Given the other moves such as in the Dow Industrials, Russell 2000 and emerging markets, it‘s unlikely that the S&P 500 met more than a temporary setback. Just look at the rush into risk-on assets as an immediate reaction to the infrastructure and taxation plans – see the high yield corporate bonds moving higher (and this time also investment grade corporate bonds finally) as long-dated Treasuries keep losing ground, and the dollar noticeably wavered.Yes, emerging worries about how this will be all paid for – not that an ideological challenge to modern monetary theory would be gaining any traction, but rather what would be the (quite predictable) effect of steep tax increases? Reduction in economic activity, unproductive moves to outset the effects, decrease in potential GDP? Remember the time proven truth that whatever the percentage rate, the government always takes in less than 20% GDP in taxes. The only question is the degree of distortions that the tax rate spawns.So, the S&P 500 upswing has good prospects of proceeding unimpeded (more profits!) as:(…) Stocks seem immune to the rising yields spell at the moment, meaning that value trades can remain at elevated levels while technology is stuck in no man‘s land and defensives are consolidating recent sharp gains (consolidating until the rising yields come back with vengeance).And there is little reason given the Fed‘s stance why they shouldn‘t. Much of the marketplace is buying into the transitory inflation story, and inflation expectations aren‘t yet running too hot. As the economic growth is stronger than current or future inflation, we‘re still at a good stage in the inflation cycle – everyone benefits and no one pays.Neither the 10-year Treasury yield, nor inflation expectations as measured by TIP:TLT ratio or RINF, are signalling trouble for the stock market. It‘s only commodities ($CRB) that have been consolidating through March – but that‘s of little consequence if you switch the view to a weekly chart (a bullish flag). The path of least resistance remains higher, and that rings true for copper, base metals, agrifoods or oil. If in doubt, look at lumber marching unimpeded to new highs.Precious metals are noticing the changing leadership baton, and have rebounded. Anticipating the copper upswing next? So much of the red metal would be needed in the years to come, whatever the actual rate of car fleet electrification. The same for ubiquitous silver applications well beyond solar panels. The cry in our Roaring Twenties is for more copper, nickel, zinc – just wait when the industrial giants‘ hunger for raw materials turns its focus onto Wall Street as the key sourcing (prospecting) place.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Its InternalsStocks haven‘t genuinely reversed yesterday – the slighly higher volume doesn‘t pass the smell test. Higher highs are the most likely scenario next.A bit mixed picture in the market breadth indicators at first sight, but not more concerning than on a daily basis only. More volume behind the upswings is missing, essentially – and new highs new lows are lagging behind their mid-Mar highs. I expect the situation to be resolved over the coming week, as tomorrow‘s non-farm payrolls won‘t likely disappoint market expectation too much really.Credit MarketsHigh yield corporate bonds (HYG ETF) confirmed the stock market upswing with a bullish move on high volume, closing at daily highs. The slow motion run into risk-on again appears underway.Tech, Value and FinancialsTech (XLK ETF) rose, and so did industrials (XLI) before retreating similarly to consumer staples (XLP ETF) or real estate (XLRE ETF). Value stocks (VTV ETF) and financials (XLF ETF) scored modest declines too, but I chalk it down to the indiscriminate selling wave into the close – it‘s a temporary setback only.Gold in the SpotlightBoth gold and gold miners rebounded strongly yesterday as the futures touched $1,680. Rising volume behind both moves, yet a partial retreat before the close – not really worrying. The key point to note is the higher high miners made when compared to their pre-Mar 08 levels.Gold‘s Force index is likely to cross over into positive territory finally again, and the open question is for how long it remains there. Thus far, there is no reason to doubt the rebound‘s veracity. The missing piece in the puzzle is the copper to Treasury yields ratio, which should better start confirming the upswing so as to lend it more credibility.Silver, Platinum and CopperSilver jumped higher as well, being a little weaker than the yellow metal in comparison, which is fine given the upcoming precious metals upleg being led by the king of metals. The key move happened in copper, which would truly power the upswing once it clears the $4.10 zone. The other side of the coin is where would the 10-year Treasury yield trade at that time, of course.SummaryS&P 500 is likely to challenge the 4,000 mark before too long, and the stock market bull top remains very far in sight thereafter still.Precious metals rebounded, and miners confirm the gold move. Once the commodities consolidation is over and copper joins in the party, the sky would get clearer for both metals sensing the upcoming Fed (yield curve control) move.
Will Biden’s Infrastructure Plan Rebuild Gold?

Will Biden’s Infrastructure Plan Rebuild Gold?

Finance Press Release Finance Press Release 01.04.2021 17:23
Biden just announced an ambitious and expensive infrastructure plan. Will it rebuild gold?Yesterday (Mar. 31), President Joe Biden the big infrastructure plan , the second major legislative initiative after the $1.9 trillion coronavirus relief plan passed in early March. The proposal includes about $2.2 trillion in new spending over eight years, boosting government expenditures even further .Despite the name, the plan assumes that only a part would be spent on infrastructure. To be more specific, Biden wants to spend $600 billion on transportation infrastructure (such as bridges, roads, airports, etc.), and more than $300 billion on improving utilities infrastructure (drinking-water pipes, electric grids, broadband). He also proposes to put more than $300 billion into building and upgrading housing and schools, $400 billion to care for elderly and disabled Americans, and almost $600 billion in research and development infrastructure, manufacturing, and job training.That doesn’t sound bad at all (after all, infrastructure is critical), but there is a catch. The plan assumes that all the spending will be financed by tax hikes. Biden proposes to raise the U.S. corporate tax rate from the 21 percent set by Trump to 28 percent, as well as to eliminate all fossil fuel industry subsidies and loopholes. So, according to the proposal, the tax reforms will add about 0.5 percent of GDP in fiscal revenues, which are believed to fully pay for investments within the next 15 years.Implications for GoldWhat does Biden’s infrastructure plan mean for the U.S. economy? Well, I won’t argue that American infrastructure needs upgrading. There is a bipartisan agreement here. The problem is, however, that government spending programs are usually inefficient, and cost more than initially planned . Additionally, the plan seeks to give the government a significant role in new important areas, and to introduce anti-business and pro-labor unions regulations.So, generally speaking, the proposal stems from Biden’s progressive belief that government can and should be a primary driver for economic growth, which is just plain wrong. As both economic theory and empirics show, the private sector is inherently more efficient than the bureaucrats (you can ask people in the former communist countries whether it’s true). Such a revolution in U.S. economic policy will weaken the allocative efficiency and hamper the long-term pace of economic growth.Last but not least, the idea to raise taxes when the economy hasn’t fully recovered from the pandemic recession is controversial, at least. Higher taxes will weaken corporate America and redistribute resources from the private sector to the public sector, negatively affecting the economy in the long-run. As well, I don’t believe that the tax revenues will fully finance the plan, so the fiscal deficits will increase further, ballooning even more the already mammoth pile of federal debt (see the chart below).And how will Biden’s infrastructure plan affect the gold market? Well, in the long-run, higher government spending, public debts, inflation , and corporate taxes should hamper the pace of economic growth and weaken corporate America and Wall Street. Hence, the proposal could be positive for gold prices, at least from the fundamental point of view .However, Biden’s bold actions seem to be welcomed so far by the financial markets. This is because the fiscal stimulus – and the rollout of vaccination – is strengthening the risk appetite. There are also hopes that the “go big” approach will allow the American economy to recover more swiftly than previously expected and quicker than its European peers. These expectations could propel the bond yields further up (see the chart below), also strengthening the U.S. dollar, and creating additional downward pressure on the gold prices .Therefore, although the Fed will have to step in and ease its monetary policy if the interest rates rise too much, the bond yields have room to move higher. This upward trend could continue to put gold under pressure , unless the yellow metal finds a way to diverge from its relationship with interest rates, for example, by attracting more investors worried about inflation.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
S&P 500 Fireworks and Gold Going Stronger

S&P 500 Fireworks and Gold Going Stronger

Monica Kingsley Monica Kingsley 05.04.2021 15:13
Bullish run in stocks is on, driven by tech gains and value swinging higher as well. Throughout the markets, risk-on has been making a return as long-dated Treasury yields retreated, dollar fell and commodities continue their bullish flag formation. As I have tweeted on Thursday, it were the investment grade corporate bonds that signalled the turnaround in yields spreading to TLT next. Given such a constellation, the dollar‘s appeal is taking a dive as the bond market gets its reprieve. When nominal yields retreat while inflation (and inflation expectations) keep rising, real rates decline, and that leads to dollar‘s decline.Stocks are more focused on the tidal wave of liquidity rather than the tax increases that follow behind. So far, it‘s still reflation – tame inflation expectations given the avalanche of fresh money, real economy slowly but surely heating up (non-farm payrolls beat expectations on Friday), and not about the long-term consequences of tax hikes:(…) Reduction in economic activity, unproductive moves to outset the effects, decrease in potential GDP? Remember the time proven truth that whatever the percentage rate, the government always takes in less than 20% GDP in taxes. The only question is the degree of distortions that the tax rate spawns.And as the falling yields were embraced by tech with open arms, the sector‘s leadership in the S&P 500 upswing is back. As you‘ll see further on, the market breadth isn‘t pitiful either – slight non-confirmation yes, but I am looking for it to be gradually resolved with yet another price upswing, and that means more open profits (that‘s 7 winning stock market 2021 trades in a row).The Fed thus far quite succeeded in passing the inflation threat off as transitory, but the rebalancing into a higher inflation envrionment is underway – just look at the bullish consolidation across many commodities.The crucial copper to 10-year Treasury yield ratio is slowly turning higher as the red metal defends gained ground, oil rebound is progressing and lumber is moving to new highs. And don‘t forget the surging soybeans and corn either. Apart from having positive influence upon S&P 500 materials or real estate sectors, precious metals have welcomed the turn, rebounding off the double bottom with miners‘ leadership and silver not getting too hot yet. And that‘s positive for the white metal‘s coming strong gains – let alone the yellow one‘s.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Its InternalsSlightly lower volume during the whole week and Friday is merely a short-term non-confirmation. It isn’t a burning issue as stocks closed the week on a strong note. The bullish price action on the heels of improving credit markets and technology-led S&P 500 upswing, has good chances of going on.See by how much market breadth improved vs. Thursday – both the advance-decline line and advance-decline volume turned reasonably higher, and given the tech leadership in the upswing, new highs new lows merely levelled off. For them to turn higher, value stocks would have to step to the fore again.Credit MarketsThe high yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio confirmed the stock market upswing with its own bullish move, and the two are overlaid quite nicely at the moment. No whiff of non-confirmation here.Tech and ValueTech (XLK ETF) rose strongly, and value stocks (VTV ETF) stocks more than defended prior gains. Even financials (XLF ETF) moved higher, regardless of the rising Treasuries. The breadth of the stock market advance isn‘t weak at all, after all.Gold in the SpotlightLet‘s quote the assessment from my Easter update:(…) There had been indeed something about the gold decoupling from rising Treasury yields that I had been raising for countless weeks. The rebound off Mar 08 low retest is plain out in the open, miners keep outperforming on the upside, and the precious metals sector faces prospects of gradual recovery, basing with a tendency to trade higher before the awaited Fed intervention on the long end of the curve comes – should the market force its hand mightily enough. Either way for now, given the rising inflation and inflation expectations, a retreat in nominal rates translates into a decline in real rates, which is what gold loves.That‘s the dynamic of calm days – once the Fed finally even hints at capping yields, expect gold fireworks. Remember, the ECB, Australia and others are in that fight at the long end of the curve already. And with so much inflation in the pipeline as the PPI underscores, an inflationary spike is virtually baked in the cake.Another weekly gold chart, this time with miners overlaid. Since the Mar 08 bottom, their outperformance has become very apparent, and miners made a higher high as gold approached the bottom last week. Coupled with the waning power of the sellers, these are positive signs for the precious metals sector.Gold‘s daily chart reveals the rebound‘s veracity – just as sharp as the dive to the second bottom was. Silver moved higher, scoring smaller gains than the yellow metal, which isn‘t however an issue as the white metal tends to outperform in the latter stages of precious metals upswings. We aren‘t there yet, and haven‘t seen it outperform in mid-Mar either.SummaryS&P 500 has challenged and conquered the 4,000 mark, and the upswing‘s internals keep being aligned bullishly. No sharp correction in sight indeed.Precious metals rebound lives on, accompanied by the miners‘ outperformance. Copper and many commodities keep consolidating, which is actually bullish given the retreat in yields. Another confirmation of the approaching upleg in commodities and precious metals as inflation starts running hotter and hotter.
Bitcoin is invaluable - 06.04.2021

Bitcoin is invaluable - 06.04.2021

Korbinian Koller Korbinian Koller 06.04.2021 10:10
In fact, Bitcoin is a decentralized global digital network which in essence is transforming analog assets into digital assets. It has been growing at 200% a year. Now after 12 years in existence Bitcoin is a digital trillion-dollar network.What supports its long-term stability is that its decentralization and transparency are immune against policy. While we typically at the mercy of policymakers and as such a middleman that can manipulate the use of a payment method, with Bitcoin, the individual is genuinely safe. Looking at the world around us where it is hard to find any field not infiltrated by groups who seek to take advantage, manipulate, and flat out lie, it is a true need one can trust a store of value to benchmark against.BTC-USDT, Daily Chart, Our chart from last week’s chartbook:Bitcoin in US Dollar, daily chart as of March 23rd, 2021.We posted the above short to midterm chart prediction in our last week’s chartbook publication.BTC-USDT, Daily Chart, As anticipated-another leg up:Bitcoin in US Dollar, daily chart as of March 29th, 2021.The market unfolded quite as planned. BTC-USDT, Weekly Chart, Health and sustainability:Bitcoin in US Dollar, weekly chart as of March 29th, 2021.If we analyze Bitcoin prices advancing from last August’s lows, we can find an intact Elliot impulse wave pattern. The Health and sustainability of this trend are derived from the three propulsion proportions. While advancing strongly in the first wave with a 323 % advancement, the pace cooled down to a 99% second leg upward. These stunning advancements followed yet again by a more moderate increase of 44% to its recent all-time highs. This abstinence of a blow-off top or run-away train allows us to believe that prices could march higher.BTC-USDT, Weekly Chart, Bitcoin is invaluable, Projections:Bitcoin in US Dollar, weekly chart as of March 29th, 2021.When examining projections, we like to stack odds by looking at both a time and a price component. The above chart shows this blend using a time cycle approach (vertical lines) and a Fibonacci extension probability measurement. Stacking these projection tools would lead us to a price target near ninety-seven thousand for the mid-next year. Our “conservative” projection is marked with the yellow circle on the top right of the chart.Bitcoin is invaluable:Looking around, and you will find that the Dollar is what around the world most value storage is bench-marked against. It seems frightening to us since the Dollar has no gold standard or otherwise intrinsic value that we still give it this much power only based on a belief. With economic powers shifting towards the east and a lack of political and economic leadership, beliefs can change, and as such, currency stability is endangered. Hedging your store of value through an instrument that holds intrinsic value based on principles over beliefs seems more than logical.Feel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.By Korbinian Koller|March 30th, 2021|Tags: Bitcoin, Bitcoin correction, Bitcoin mining, crypto analysis, crypto chartbook, crypto mining, low risk, quad exit, technical analysis, trading education|0 CommentsAbout the Author: Korbinian KollerOutstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Ladies and Gentlemen, Mr. Dollar is Back

Ladies and Gentlemen, Mr. Dollar is Back

Finance Press Release Finance Press Release 06.04.2021 16:43
Previously dismissed, the USDX may now be back with a vengeance. Sentiment is swinging away from shorts and there is an uncanny historical pattern.With a potential bearish pattern already broken, the USDX is resuming its journey northward. And why is it geared to do well? Is it because the U.S. economy is ripping head? Definitely not - that’s not happening. It’s rather because other regions (think Europe and Japan) are doing even worse.The dollar’s imminent rise doesn’t mean that gold can’t still experience some very short-term upswing, but for the medium-term, the precious metals continue to face bearish headwinds.With the greenback laying back and enjoying a well-deserved Easter vacation, gold, silver and the gold miners avoided a dollar-drama for at least another day. However, with the USD Index working to regain its supremacy, along with investors’ respect, the ‘death of the dollar’ narrative has quietly dissipated from the investing zeitgeist.Case in point: the USD Index has broken above its monthly declining resistance line and has already made four new highs since the New Year. More importantly though, because the precious metals have a strong negative correlation with the U.S. dollar, the upward momentum has coincided with an 8.78% drawdown of gold, a 6.18% drawdown of silver and a 6.41% drawdown of the GDX ETF.Please see below:And showing no signs of slowing down, with a well-rested USD Index itching to get back to work, we could see ‘business as usual’ in the coming days. On Apr. 2, I warned that a short-term correction could usher the USD Index back to its March high.That’s exactly what happened yesterday (Apr. 5).However, with the corrective culmination approaching the finish line, the USD Index remains poised to resume its uptrend.Adding to the optimism, the tide has already gone out on a sea full of USD Index shorts. And because Warren Buffett once said that “only when the tide goes out do you discover who's been swimming naked,” highly leveraged speculators could be the next to follow.Please see below:To explain, notice how oversold periods in 2014 and 2018 – where net-speculative short interest as a percentage of total open interest (based on the CoT data) was extremely high – preceded sharp rallies in the USD Index? Thus, with 2021 the most extreme on record, the forthcoming rally should be significant.How significant? Well, let’s take a look at how things developed in the past – after all, history tends to rhyme.Wayback PlaybackLet’s focus on what happened when the net speculative positions were significantly (!) negative and then they became significantly (!) positive, so without paying attention to tiny moves (like the one that we saw last summer), let’s focus on the more meaningful ones (like the one that we see right now – the net positions just became visibly positive – over 16%, after being very negative for quite some time.In short, that’s how the following profound rallies started:The big 2008 rally (over 16 index points)The big 2009 – 2010 rally (over 14 index points)The 2011 – 2012 rally (over 11 index points)The 2013 rally (“only” over 5 index points)The big 2014 – 2015 rally (over 20 index points)The 2018 rally (over 15 index points)The current rally started at about 89, so if the “normal” (the above shows what is the normal course of action) happens, the USD Index is likely to rally to at least 94, but since the 5-index point rally seems to be the data outlier, it might be better to base the target on the remaining 5 cases. Consequently, one could expect the USD Index to rally by at least 11 – 20 index points, based on the net speculative positions alone. This means the upside target area of about 105 – 114.Consequently, a comeback to the 2020 highs is not only very likely, but also the conservative scenario.Moreover, let’s keep in mind that the very bullish analogy to the 2018 rally remains intact. Please see below:To explain, I wrote on Friday (Apr. 2):What we saw yesterday definitely qualifies as a small correction. In fact, even if it was doubled it would still be small. And – more importantly – it would be in perfect tune with what happened in 2018 during the big rally.After rallying visibly above the:93 level200-day moving average61.8% Fibonacci retracement level based on the final part of the declinethe USD Index moved back below the 93 level. This happened in May 2018 and it happened last week.Since both rallies are so similar, it’s nothing odd that we see a pullback in a similar situation.Back in 2018, the pullback was small and quick. It ended without the USD Index reaching its 200-day moving average. The pullback ended when the USDX moved approximately to its previous high and slightly below the 61.8% Fibonacci retracement.Applying this to the current situation (previous high at about 92.5, the 61.8% Fibonacci retracement at about 92.7, and the 200-day moving average at 92.66), it seems that the USD Index would be likely to find its bottom in the 92.3 – 92.7 area.Because of this, the outlook remains profoundly bearish for the gold , silver , and mining stocks over the medium term (even though the next few days are relatively unclear, especially due to gold’s triangle-vertex based reversal that’s due this week ). If you analyze the table below, you can see that the precious metals tend to move inversely to the U.S. dollar.The 2017-2018 AnalogueBut as the most important development affecting the precious metals, the USD Index’s 2017-2018 analogue is already unfolding before our eyes. With this version likely to be titled ‘The Resurgence: Part 2,’ while history often rhymes, it’s rare for it to rhyme with this level of specificity . For context, in 2018, the USD Index’s breakout above its 50-day moving average is exactly what added gasoline to the USDX’s 2018 fire. And after the 2018 breakout, the USDX surged back to its previous high. Today, that level is 94.5.Even more ominous for the precious metals, when the USD Index turned a short-term decline into consolidation in mid-2018, can you guess what happened next? Well, the USD Index moved significantly higher, while gold moved significantly lower.Please see below:USDX Broke a Potential Bearish PatternLikewise, a potentially bearish pattern that I had been monitoring – where the USD Index’s price action from July to October 2020 mirrored the price action from December 2020 to February/March 2021– has officially been broken . With the USD Index’s medium-term breakout trumping the former, the potentially bearish pattern has been invalidated and the USD Index remains on a journey to redemption.But to what end?Well, if we look back at 2020, the USD Index attempted to recapture its previous highs. But lacking the upward momentum, the failure was followed by a sharp move lower. Today, however, the USD Index has broken above its previous highs and the greenback verified the breakout by consolidating, moving back toward the previous lows and rising once again. Now, the USD Index is visibly above its previous highs .Taken together, and given the magnitude of the 2017-2018 upswing , ~94.5 is likely the USD Index’s first stop. And in the months to follow, the USDX will likely exceed 100 at some point over the medium or long term.No, not because the U.S. is doing so great in economic terms. It’s because it’s doing (and likely to do) better than the Eurozone and Japan, and it’s this relative performance that matters, not the strength of just one single country or monetary area. After all, the USD Index is a weighted average of currency exchange rates and the latter move on a relative basis.In conclusion, while the USD Index’s decline on Apr. 5 created a goldilocks environment for the precious metals, the latter should have enjoyed a much larger upswing. However, with the U.S. 10-Year Treasury yield jumping by another 2.37% and the precious metals still shaken from a string of false breakouts, their relatively weak performance was quite revealing. Think about it: if gold, silver and the gold miners can’t make up ground when their main adversary retreats, how are they likely to respond when the USD Index regains its mojo? As a result, with the USD Index’s attitude about to shift from accommodating to unkind, gold, silver and the gold miners will likely see lower levels before forming a lasting bottom.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
BAC and Citi: which one is a better buy?

BAC and Citi: which one is a better buy?

Kseniya Medik Kseniya Medik 07.04.2021 10:20
What’s going to happen? Bank of America and Citigroup will report their earnings in Q1’2021 on April 15 before the market open. What to do with it? If BAC and Citi outperform market expectations, it’s possible that the price of their respective stocks rises. Therefore, if you’re convinced that the results will be better than thought, you buy before the reporting date of April 15 in the expectation that the price will rise. Once it goes higher, you sell. Are we convinced that these banks will outperform? The fundamental factor that supports the rising profits and, consequently, stock value growth for both banks is the improving economic outlook. Primarily, in the US, and globally. One of the specific elements is the rising US Treasury yields which have a direct influence on the banks’ own interest rates and, hence, profits. However, this factor may not have reached its full momentum in Q1’2021 as it wasn’t yet clear during the first months of the year how the situation will unroll. That’s why this factor is more about the mid-term and long-term. However, that doesn’t mean that observers won’t include that into their reaction to the coming release of the earnings data on April 15. Bank of America, Citigroup, and other stocks are available in FBS Trader! Besides, you can trade stock through MetaTrader 5. What’s expected? The estimated EPS of BAC for Q1’2021 is $0.63; the one of Citi - $2.24. Take into account the differences now: Citi brought much stronger data in the last two quarters of 2020 against the forecasts than the Bank of American did against the market’s projections. In the meantime, Citi’s stock looks more vulnerable responsive to the downward pressures while BAC is making all-time highs. On the one hand, it makes it easier to plan for an optimistic scenario of Citi: it has its pre-virus high of $82 to be reached by bulls. The Bank of America, on the other hand, is already exploring uncharted upside territories. Therefore, we can only extrapolate that a better-than-thought earnings report may push its stock further above – into the area of $43 per share.
Gold & the USDX: Correlations

U.S. Labor Market Is Recovering. Will Gold Too?

Finance Press Release Finance Press Release 08.04.2021 16:55
The March nonfarm payrolls were surprisingly strong. If the current favorable trend in the U.S. labor market continues, gold may struggle.As the chart below shows, in March 2021, total nonfarm payrolls rose by 916,000 , following gains of 468,000 in February (after an upward revision). The latest gains were the largest since August 2020. It’s important to note here that job growth was widespread, although led by gains in leisure, hospitality, education, and construction.Furthermore, the U.S. economy added significantly more jobs than expected . Economists surveyed by MarketWatch forecasted 675,000 additions, but it turned out that employment in January and February combined was 156,000 higher than previously reported. Also on the positive side, the unemployment rate declined from 6.2 to 6 percent , as the chart below shows. As the unemployment rate is much below its high from April 2020, it’s clear that the U.S. labor market is recovering from the pandemic recession .However, significant slack remains. First, the unemployment rate is still 2.5 percentage points higher compared to February 2020, before the pandemic started. Second, the broader unemployment rates, which paint a more accurate picture of unemployment, are even further from their pre-pandemic levels. For instance, the broadest U-6 rate was 10.7 percent in March, i.e., 3.7 percentage points above the level seen in early 2020. Third, the labor-participation rate is 1.8 percentage points lower than its pre-pandemic level, which means that many people simply dropped out from the labor market instead of searching for a job.Implications for GoldWhat does it all mean for the yellow metal? Well, gold’s reaction to a generally good employment situation report was positive . As the chart below shows, the London price of the shiny metal increased from $1,726 on April 1 to $1,745 on April 6, 2021, when the fixing resumed after the holidays.The explanation for gold’s positive reaction might lie in the fact that although the employment report was positive, it won’t be enough to alter the Fed’s monetary policy . As a reminder, the U.S. central bank wants to see “substantial further progress” towards labor market repair before tapering the asset purchases and raising the interest rates . Of course, further such reports with almost one million job gains would force the Fed to admit that the situation improved substantially.However, the Fed would like to see a continuation of the current trend for a while before it will alter its stance. Indeed, as Chicago Federal Reserve Bank President Charles Evans recently said, “those conditions will not be met for a while (…) Policy is likely on hold for some time.”And it won’t be easy to sustain the current favorable trend in the labor market. This is because the large share of the unemployed are long-term unemployed, roughly 43 percent, and there is a risk that these people will get discouraged and drop out from the labor market. It’s easier to put short-term unemployed than long-term unemployed into work again.Regardless, gold’s reaction amid the surprisingly strong nonfarm payrolls report and the accompanying rise in the bond yields could be seen as encouraging . Some analysts even believe that the yellow metal has bottomed out.However, given that the U.S. outpaces its major peers in the pace of economic recovery, it might be too early to call the return of the gold bulls . So, the medium-term downside risks remain present in the gold market. Although the single report won’t cause an immediate shift in the Fed’s stance, if this trend continues, the market expectations of the Fed’s tapering and hikes in the federal funds rate could move up, exerting downward pressure on gold prices.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Stocks are Heating Up

Stocks are Heating Up

Finance Press Release Finance Press Release 09.04.2021 15:40
In keeping with its historical performance, April has started off white-hot. We ended March, and Q1 for that matter, with more questions than answers.But April 2021 started with a blowout jobs report, and the indices haven't looked back since. Right now, the S&P 500 is at yet another record, the Dow is just about at a record, and we've seen a furious comeback for Big Tech and growth stocks.The sentiment is certainly better now than it was just a couple of weeks ago. However, I implore you to remember that every month in 2021 thus far has started off hot and saw a pullback/volatility occur in the second half of the month.Think about it. In January, we had the GameStop trade spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won't just disappear because we want them to. If we could make things magically disappear, COVID would've been over yesterday.But, as I mentioned before, April historically is a strong month for stocks. According to Ryan Detrick , chief market strategist at LPL Financial, "Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April."During April, the S&P 500 has gained in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.The market concerns, though, are still intact. We still have to worry about inflation, bond yields, and stocks peaking. According to Binky Chadha , Deutsche Bank's chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months.Another thing I'm a bit concerned about is the $2 trillion infrastructure plan. While this is great for America's crumbling infrastructure, do we really need to spend any more trillions?Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it's still a tax hike.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:We're hot right now.However, we could see more volatility and more muted gains than what we've come to know over the last year.April is historically strong, but please continue to monitor inflation, yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. Russell 2000- Still Buyable?Figure 1- iShares Russell 2000 ETF (IWM)I proudly switched my call on the iShares Russell 2000 ETF (IWM) to a BUY on March 24. I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February and swore I wouldn’t make that mistake again.We’re up to over 5% since then.The climate right now supports the Russell 2000. The current economic policy is tailor-made for small-caps. The best part, though? The Russell is still very buyable.The RSI is still hovering around 50. I also checked out the chart and noticed that almost every time the IWM touched or minorly declined below its 50-day moving average, it reversed.Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.Fast forward to now. The Russell 2000, despite its gains since tanking on March 23, remains right at about its 50-day moving average.Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.According to the chart, we may have found double-bottom support too.Based on the chart and macro-level tailwinds, I feel that you can still BUY this index. In fact, it may be the most buyable of them all.For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Will Upcoming Inflation Take Gold With It?

Will Upcoming Inflation Take Gold With It?

Finance Press Release Finance Press Release 09.04.2021 16:25
Inflation is coming. Gold may benefit from it, especially if inflation turns out to be more long-lasting than central bankers and markets believe.Brace yourselves, inflation is coming ! Importantly, not only grumblers such as myself are talking about rising prices right now, but even the Fed officials themselves admitted that inflation will jump this year. Indeed, in the latest dot plot , the Federal Open Market Committee (FOMC) expects that the PCE annual percent change will soar from 1.3 percent in December 2020 to 2.4 percent at the end of this year. Importantly, their projections increased significantly in the last three months when they amounted to 1.8 percent.And remember, we are talking here about the official inflation figures. The real inflationary pressure, which also affects asset prices, is much stronger. Furthermore, the pandemic changed the composition of consumption, as people are buying more goods and less services. And guess what, the prices of goods are rising more than the prices of services, so many people’s actual consumption baskets have become more expensive than official ones, implying that true inflation is higher than the officially reported one, as the IMF has recently admitted .Does this mean that the FOMC members have all suddenly become monetary hawks worried about higher inflation? Not at all. The Fed believes that inflation will be temporary, caused by the base effects (very low inflation readings in the second quarter of 2020) and by the reopening of the economy that will trigger higher consumer spending and some increases in prices.The U.S. central bank might be right. After all, there will be some temporary forces at play. There always are, but – oh, what a funny thing! – the Fed always cites “transient effects on inflation” when it’s increasing, but not when it’s declining. The problem is, however, that the markets don’t believe the U.S. central bank . Please take a look at the chart below, which displays inflation expectations over the next five and ten upcoming years.As you can see, both medium-term and long-term inflation expectations have significantly increased in the last few months. It means that investors don’t only expect a temporary rise in inflation – on the contrary, they forecast a more persistent increases in prices . Indeed, Mr. Market believes that inflation will be, on average, 2.5 percent in the next 5 years and almost 2.3 percent in the next 10 years, significantly above the Fed’s target of 2 percent.Of course, it might be the case that Mr. Market is wrong, and Mr. Powell is right. But what is disturbing is the Fed’s confidence – or, rather overconfidence – that it can contain inflation if it turns out to be something more than only a temporary phenomenon. Such a conceit led to stagflation in the 1970s. Gold shined at that time.Then, as today, the central bank focused more on the maximum employment than inflation, believing that it can always control the latter by raising the federal funds rate if necessary. But, as Robert J. Barro, from Harvard University, points out , “the problem is that hiking short-term rates will have little impact on inflation once high long-term expected inflation has taken root.”And the recent Fed’s actions, including the new monetary framework, according to which the U.S. central bank tries to overshoot its target for some time, may easily waste the reputational capital that was created by Paul Volcker and de-anchor inflation expectations.In other words, a negative shock can be accommodated by the central bank without long-lasting effects, as people understand that it’s a unique one-off event, after which everything will return to normalcy. But the Fed is far from normalizing its monetary policy . On the contrary, it has recently signaled that it wouldn’t raise interest rates preemptively to prevent inflation, as it could hamper the economic recovery. The risk here is that if people start to view exceptional as the new normal, their inflation expectations could shift, and become unanchored.To sum up, it might be the case that markets are overstating short-term inflation risks. But it’s also possible that politicians and central bankers understate the longer-term inflationary dangers , as Kenneth Rogoff, also from Harvard University, argues . After all, unlike in the aftermath of the Great Recession , when only the monetary base skyrocketed, the pace of growth of the broad money supply also soared this time – and it’s still increasing, as the chart below shows.In other words, while all the created liquidity after the global financial crisis of 2007-2009 flowed mainly into the financial markets, during the pandemic , it flowed into the real economy to a much larger extent, which can create more inflationary pressure.What’s more, the easy monetary policy is now accompanied by a very loose fiscal policy and the unprecedentedly large fiscal deficits , which could push the economy deeper into the debt trap . This could undermine the central-bank independence and prevent a timely normalization of interest rates , not to mention the weakening of globalization’s downside impact on inflation, caused partially by demographic factors and reshuffling in supply chains. Last but not least, the rising commodity prices and international transport costs, accompanied by the weakening U.S. dollar, may be harbingers of an approaching inflation monster.What does it all mean for the gold market? Well, the jump in inflation in 2021 should be positive for the yellow metal , which could gain as an inflation hedge . The downward pressure on the real interest rates should also be supportive for gold prices, although the rally in the bond yields may counteract this effect. But if Powell is right and inflation turns out to be only temporary, then gold may be hard hit, and we could see a goldilocks economy again (i.e., fast economic growth with low inflation). However, if markets are right, or if the long-term inflationary risks materialize, which even investors may understate, gold should shine.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Dovish Fed and Higher Inflation Equals Stronger Gold

Dovish Fed and Higher Inflation Equals Stronger Gold

Finance Press Release Finance Press Release 13.04.2021 16:47
The latest FOMC minutes were dovish, especially in light of the recent increase in inflation. That’s good for gold.Last week, The Federal Open Market Committee (FOMC) published minutes from its last meeting in March . They show that – in light of positive economic indicators – the members of the Committee turned out to be more optimistic about the U.S. economy since the previous meeting. But this is what we already know from the March economic projections.What is new and much more important is that Fed officials expressed the view that despite all the progress, the economic situation remained unsatisfactory with many indicators still far from the pre-pandemic level and the Fed’s long-term targets:Despite these positive indicators and an improved public health situation, participants agreed that the economy remained far from the Committee's longer-run goals and that the path ahead remained highly uncertain, with the pandemic continuing to pose considerable risks to the outlook.In consequence – and this is probably the key message from the recent minutes – the FOMC members reaffirmed that they are in no rush to taper the quantitative easing . Furthermore, the U.S. central bank will announce a change in the pace of asset purchases well in advance:Participants noted that it would likely be some time until substantial further progress toward the Committee's maximum-employment and price-stability goals would be realized and that, consistent with the Committee's outcome-based guidance, asset purchases would continue at least at the current pace until then. A number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases. The timing of such communications would depend on the evolution of the economy and the pace of progress toward the Committee's goals.And the hike in the federal funds rate will happen only after the start of the normalization of the Fed’s balance sheet . So, given a lack of any communication in this regard, investors shouldn’t expect any increases in the interest rates for years .Last but not least, the Fed not only started to expect higher inflation – as a reminder, the FOMC participants expect 2.4 percent PCE inflation in 2021 – but it also “viewed the risks of upside inflationary pressures as having increased since the previous forecast”. However, the central bankers still believe that the increase in inflation this year will be transitory due to the base effects and supply disruptions:In the near term, the 12-month change in PCE prices was expected to move above 2 percent as the low inflation readings from the spring of last year drop out of the calculation. Most participants also pointed to supply constraints that could contribute to price increases for some goods in coming months as the economy continued to reopen. After the transitory effects of these factors fade, however, participants generally anticipated that annual inflation readings would edge down next year.This is a puzzling view in light of the fact that many participants “judged that the release of pent-up demand could boost consumption growth further as social distancing waned.” So, in some magical way, the release of pent-up demand could boost consumption, but not prices, and inflation could be increased only by supply factor, but not by demand factors.Implications for GoldWhat do the recent FOMC minutes imply for the yellow metal? Well, the increase in expected and actual inflation rates combined with the Fed’s dovish stance could create downward pressure on the real interest rates and the U.S. dollar, thus supporting gold prices . The yellow metal could also benefit from the elevated demand for inflation hedges in an environment of stronger upward pressure on prices.Indeed, the price of gold jumped shortly on Thursday (Apr. 8) above $1,750, as the chart below shows. This upward move was temporary, though, but that can change soon, as the inflation genie has popped out of the bottle.The Producer Price Index increased by one percent in March , twice more than in February, and significantly above the expectations of a rise of 0.4 percent. As well, the final demand index moved up 4.2 percent for the twelve months ended in March, the largest increase since September 2011. Meanwhile, the index for all commodities surged even more (12 percent!), in the fastest pace since the Great Recession , as the chart below shows. Importantly, the Consumer Price Index has also been rising recently (I will cover this report in the next edition of the Fundamental Gold Report).Of course, the rise in inflation may also increase the nominal bond yields, which could be negative for the gold market. However, the rally in the bond yields was mainly caused by the fact that investors priced in a more aggressive path of the federal funds rate than the FOMC members have indicated. But after the recent minutes it seems that these traders are starting to capitulate and will not fight the Fed anymore. This would be good news for the gold market.Indeed, the second quarter started much better for the yellow metal than the awful beginning of the year, and there are some reasons (dovish Fed, higher inflation, limited potential for further rally in the bond yields) for cautious optimism. But the key problem is that the Fed is still relatively hawkish compared to the Bank of Japan or the European Central Bank . Well, we will see, stay tuned!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Many Sectors Are Primed For Another Breakout Rally - Are You?

Many Sectors Are Primed For Another Breakout Rally - Are You?

Chris Vermeulen Chris Vermeulen 13.04.2021 21:42
As we start moving into the Q1:2021 earnings season, we need to be aware of the risks associated with the volatility often associated with earnings data and unknowns.  Nonetheless, there are other factors that appear to be present in current trends which suggest earnings may prompt a moderately strong upside breakout rally – again.One key factor is that the US markets are already starting to price in forwarding expectations related to a reflation economy – a post-COVID acceleration in activity, consumer participation, and manufacturing.  Secondarily, we must also consider the continued stimulus efforts, easy monetary policy from the US Fed, and the continued trending related to the 12+ month long COVID-19 recovery rally. In some ways, any damage to the economy related to COVID-19 may have already happened well over 6+ months ago.  Certainly, there are other issues we are still dealing with and recovering from, but the strength of the US economy since May/June of 2020 has been incredible.  When we combine the strength of the economic recovery with the extended support provided by the US Fed and US government stimulus/policy efforts, we are left with only one conclusion:  the markets will likely continue to rally until something stops this trend.Just this week, after stronger inflation data posted last week, and as earnings data starts to hit the wires, we are seeing some early signs that the US major indexes are likely to continue to trend higher – even while faced with odd earnings data.  If this continues, we may see the US major indexes, and various ETF sectors, continue to rally throughout most of April – if not longer.Come watch over 60 investment and trading LEGENDS share their secrets with you for free – click here for your FREE REGISTRATION!Today, Aphria (APHA), announced a third-quarter “miss” on sales, and net operating loss fell more than 14%.  This tugged many Cannabis-related stocks lower and pulled the Alternative Harvest ETF (MJ) lower by over 4%.  Still, the Transportation Index, Financial sector ETF (XLF), and S&P500 SPDR ETF (SPY) rallied to new all-time highs.This suggests the market is discounting certain sector components as “struggling” within a broadly appreciating market trend.  In this environment, even those symbols which perform poorly won't disrupt the Bullish strength of the general markets.  Because of this, we believe the overall trend bias, which is Bullish, will continue to push most of the market higher over the next few days/weeks... at least until something happens to break this trend or when investors suddenly shift away from this trend.SPY Rally May Be Far From Over At This StageLet's start by reviewing this SPY Daily chart below (S&P500 SPDR ETF).  As you can see, the recent rally has already moved above the GREEN 100% Fibonacci Measured Move target level near $410.  Any continued rally from this level would suggest an upside price extension beyond the 100% Fibonacci Measured Move level is initiating.  This type of trending does happen and can often prompt a higher target level (possibly 200% or higher) above our initial targets.What is interesting in our review of these charts is the SPY may be rallying above recent price range targets, using the Fibonacci Measured Move technique, but other sectors appear to really have quite a bit of room to run.Transportation Index Continues To Suggest Stronger US RecoveryThis Transportation Index Daily Chart, TRAN, suggests a target level near $15,627 so it is reasonable to assume the Transportation Index may continue to rally more than 4% higher from current levels.  Ideally, if this were to happen, it would suggest the broader economic recovery is strengthening and we may expect to see the US major indexes continue to rally higher as well.At this time, when economic data and Q1:2021 earnings are streaming into the news wires, we usually expect some extended volatility in the markets.  The VIX may rally back above 19 to 24 over time if the markets reflect the varied earnings outcomes we expect.  Yet, we believe the overall bias of the markets at this stage of the trend is solidly Bullish.Financial Sector ETF Ready To Rally Above $37The Financial sector ETF (XLF), as seen in the following chart, is poised to break higher after a dramatic recovery in price after December 2020.  The rally from $29 to over $35 represents a solid +20% advance and the recent resistance level, near $35.30, is a key level to watch as this sector continues to trend.  Once that resistance level is breached, we believe a continued rally attempt will target $37, then $39.40.The expected recovery in the US economy will prompt more consumer spending and the use of credit.  Over the past 8+ months, US consumers have worked to bring down their credit levels and saved more money because of the change in how we addressed COVID work-styles and lack of travel (and extra money from the Stimulus payments).  That may not change right away, but eventually, consumers will start to engage in the economy as travel starts to recover and summer activities start to take place.  This suggests spending, travel, vacationing, eating out and other activities will prompt a new wave of economic activity within the Financial Sector.The US markets are uniquely poised to further upside price gains because the US has such a dynamic core economy.  Our base of consumers is, generally, working in jobs, saving more, and more capable of traveling within the US to engage in summer activities.  Because of this, we believe the continued recovery of the US economy will prompt another wave of higher prices throughout the Q1:2021 earnings season.  We believe a number of solid earnings and expectations will support the market and future expectations will support a continued moderate price rally in certain sectors.The strongest sectors are going to continue to be the best performers over time.  Being able to identify and trade these sectors is key to being able to efficiently target profits.  You can learn more about the BAN strategy and how to identify and trade better sector setups by registering for our FREE webinar here.  We've built this technology to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.For those who believe in the power of trading on relative strength, market cycles, and momentum but don’t have the time to do the research every day then my BAN Trader Pro newsletter service does all the work for you with daily market reports, research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers.Happy Trading!
Inflation Soared in March. Will Gold Jump Too?

Inflation Soared in March. Will Gold Jump Too?

Finance Press Release Finance Press Release 15.04.2021 17:42
Inflation accelerated its pace in March, which should support gold when economic confidence softens.The U.S. CPI inflation rate rose 0.6% in March , following a 0.4% increase in February. It was the biggest monthly jump since August 2012. The move was larger than most analysts expected. However, I’m not surprised at all, as after February’s CPI report, I wrote that inflation “may rise further in the coming months”.The acceleration in the inflation rate was driven mainly by a 9.1% spike in the gasoline prices over the past year (in March 2020, the price of oil plunged). But the core CPI monthly rate, that excludes energy and food prices, also accelerated to 0.3% in March, from 0.1% in February.So, inflation has finally reared its ugly head, which is even more clearly seen on an annual basis. The overall CPI soared 2.6% over the last 12 months ending in March, following a 1.7% increase in the preceding month. Meanwhile, the core CPI jumped 1.6%, following a 1.3% rise in February. Hence, as the chart below shows, inflation has not only increased significantly since the bottom in May 2020, but it has also substantially surpassed the Fed’s target.What’s important is that the recent jump in inflation is not a one-off event. We can expect that high inflation will stay with us for some time, or it can accelerate further next month, given the fact that oil prices plunged deeply in April 2020 (some oil futures even fell into negative territory!). So, the next CPI reading will have to factor in a quadrupling of oil prices over the year.Implications for GoldWhat does it all mean for the price of gold? Well, higher inflation should support gold , which is perceived as an inflation hedge . Furthermore, higher inflation should decrease or at least soften the rise in the real interest rates , further supporting the price of the yellow metal.As the chart below shows, gold’s immediate response was positive, yet rather limited, with the price of the yellow metal increasing to almost $1,748 on Tuesday (Apr.13). After all, the increase in inflation was widely expected given the base effects and the latest Fed’s economic projections. So, no big surprises here.However, I believe that inflation hasn’t said its last word yet . It could be just the beginning. You see, the current mainstream view is that inflation is no longer a problem in the contemporary economy, and that the 1970s-like stagflation will never happen again. Furthermore, the Fed believes that it would be able to contain inflation if it turns out to be really problematic. As Powell said in his recent interview ,The economy has changed. And what we saw in the last couple of cycles is that inflation never really moved up as unemployment went down. We had 3.5% unemployment, which is a 50-year low for much of the last two years before the pandemic. And inflation didn’t really react much. That means that we can afford to wait to see actual inflation appear before we raise interest rates.The Fed Chair is right. The economy has changed. But the economic laws haven’t. So, the combination of the recent surge in the broad money supply , the supply disruptions, demographic shifts, base effects, and the realization of the pent-up demand, may still lead to inflation. And remember that the Fed’s new monetary regime is more tolerant to upward price pressure, which increases the odds of inflation getting out of control.In other words, I believe that the risk of stagflation is underestimated. With increasing vaccination, unlocking the economy, and expectations of a vigorous recovery, economic confidence is high. So, investors should focus more on economic growth than on inflation. However, I bet that when this post-pandemic euphoria wanes, there will be a deterioration in economic confidence, caused either by more persistent and higher inflation than expected, or higher bond yields , or problems with the private and public debts . When this happens, gold should rally again.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Earnings Season’s Hot Start

Earnings Season’s Hot Start

Finance Press Release Finance Press Release 16.04.2021 15:42
“Other than my Cincinnati Bengals breaking my heart, few things are more consistent than stocks higher in April.”As a stock nerd and NFL fan, I love this quote from Ryan Detrick , the chief market strategist at LPL Financial.Historically in April, the S&P 500 has seen gains in 14 of the past 15 years. April has also been the strongest month for stocks over the past 20 years.April 2021 has been no exception. Although March, and Q1, for that matter, ended with more questions than answers, this month has been nothing but white-hot.The month kicked off with a blowout jobs report. It then continued with two consecutive weeks of jobless claims crushing estimates, retail sales coming in almost ⅓ higher than projected, and bank earnings blowing past forecasts. The Dow Jones and S&P 500 seemingly hit fresh record-highs every other day, and despite complications with JnJ’s one-dose vaccine, all signs point towards our life returning to normal by this summer.While optimism is high right now, I implore you to remain cautious. I’m really not sure how much higher the Dow and S&P can go without pulling back somewhat. Not to mention, it still has not been smooth sailing for Cathie Wood stocks or SPACs for the last two months either. This rotation into recovery names is very real.Remember that every month in 2021 thus far has started off hot and saw a pullback and volatility occur by the second half of the month.We are now officially in the latter half of April. Although, as I said, April is historically a strong performing month, think about this. By the second half of January, we had Reddit trades spooking investors. In February and March, we had surging bond yields, inflation fears, or Jay Powell comments that rubbed people the wrong way. These concerns won’t just disappear because we want them to. If we could make things magically disappear, COVID would’ve been over yesterday.According to Binky Chadha , Deutsche Bank’s chief U.S. equity strategist, we could see a significant pullback between 6% and 10% over the next three months because of potentially full valuations and inflation fears. Even if this $2 trillion infrastructure plan doesn’t pass in full, do we really need to spend any more trillions with an economy starting to turn red hot?Plus, how do you think this will be paid for? Hiking taxes- namely corporate taxes . Those gains that high growth stocks saw after Trump cut corporate taxes in 2017 could very well go away. While President Biden has indicated a willingness to negotiate his 28% corporate tax proposal, it’s still a tax hike.My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one to help people who needed help instead of the ultra-high net worth.With that said, to sum it up:We’re hot right now.However, we could see more volatility and more muted gains than what we’ve come to know over the last year.April is historically strong, but please monitor overvaluation, inflation, bond yields, and potential tax hikes. Be optimistic but realistic. A decline above ~20%, leading to a bear market, appears unlikely. Yet, we could eventually see a minor pullback by the summer, as Deutsche Bank said.Hopefully, you find my insights enlightening. I welcome your thoughts and questions and wish you the best of luck. The Dow Jones- How Much Higher Could We Go?Figure 1- Dow Jones Industrial Average $INDUThe Dow Jones remains red hot in 2021. Strong bank earnings, a recovering economy, and the potential for further infrastructure spending have sent the index to record highs in what seems to be every other day. Unfortunately, we are nowhere close to buyable any longer and are firmly overbought with an RSI over 72.For the longest time, I’ve said to HOLD the Dow and let the gains ride. Now, I think it’s an excellent time to trim and take profits. Many analysts believe the index could end the year at 35,000 or higher, and the wheels are still in motion for that to happen. The problem, though? We’re above 34,000, and we’re only in mid-April.You could do a heck of a lot better for a buyable entry point.Having Dow exposure is valuable. The index has many strong recovery cyclical plays that should benefit from what appears to be an economic recovery and reopening going even better than expected. The Dow could also be quite beneficial as a hedge against volatile growth stocks and SPACs. You won’t see bond yields spooking this index as much.But at this level, it’s probably better to SELL and consider trimming profits.For an ETF that aims to correlate with the Dow’s performance, the SPDR Dow Jones ETF (DIA) is a great option.For more of my thoughts on the market, such as tech, inflation fears, and why I love emerging market opportunities, sign up for my premium analysis today.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Matthew Levy, CFA Stock Trading Strategist Sunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits' employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold Fireworks Doubt the Official Inflation Story

Gold Fireworks Doubt the Official Inflation Story

Monica Kingsley Monica Kingsley 16.04.2021 16:09
The S&P 500 red candle and then some – erased in a day, that‘s what you get with the Fed always having your back. The staircase climb certainly looks like continuing without any real breather. Whatever steep ascent you compare it to (Jun or early Sep 2020), this one is different in that it doesn‘t offer but token corrections. Not that it would be reasonable to expect a steep downswing given the tide of liquidity, but even sideways trading has become rarer than it used to be.With the VIX still below 17 and the put/call ratio in the middle of its slowly but surely less complacent range, the path of least resistance is higher – the signs are still aligned behind the upswing to go on: (…) Don‘t pin your hopes too high for a (sharp) correction though. Yes, [on Wednesday] stocks listened to the weakening corporate credit markets, and the daily retreat in long-dated Treasuries inspired some profit taking in tech. Quite some run there as yields stabilized, which has turned XLK from very stretched to the downside of its 50-day moving average, to the upside extreme. Tesla also followed suit but I doubt this is a true reversal of tech fortunes.Just at yesterday‘s moves – technology surged higher without too much help from the behemoths, and value stocks surged. Even financials ignored the sharp retreat in yields. Yes, that‘s the result of retails sales outdoing expectations and unemployment claims dropping sharply – the economic recovery is doing fine, manufacturing expands, and inflation doesn‘t yet bite. We‘re still in the reflationary stage where economic growth is higher than the rate of inflation or its expectations.Gold loved the TLT upswing and Powell‘s assurances about not selling bonds back into the market in rememberance of eating a humble pie after the Dec 2018 hissy fit in the stock market (isn‘t this the third mandate actually, the cynics might ask). I called for the sharp gains across the precious metals board sending my open position(s) even more into the black – both on Wednesday:(…) CPI inflation is hitting in the moment, and its pressure would get worse in the coming readings. Yet the market isn‘t alarmed now as evidenced by the inflation expectations not running hot – the Fed quite successfully sold the transitory story, it seems. Unless you look at lumber, steel or similar, of course. None of the commodities have really corrected, and the copper performance bodes well for the precious metals too.and Thursday:(…) Precious metals didn‘t swing higher immediately, but I expect them to take the commodities‘ cue next. When Powell says the Fed isn‘t thinking about selling bonds back into the market, and that he learned a lesson (hello, late 2018), real rates aren‘t probably rising much any time soon. It appears to me a question of time before inflation expectations squeeze the nominal yields some more, which is what gold would love.The stalwart performance in the miners goes on after a daily pause as gold gathers strength and silver outperformed yesterday. Silver miners and gold juniors are pulling ahead reliably as well, not just gold seniors.The run on $1,760 awaits.This is just the beginning, and as I had been repeatedly stating on Twitter:(…) The GDX closing convincingly above $35 would usher in great gold and silver moves.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookNew ATHs, again and this time on rising volume – the momentum still remains with the bulls even though the daily indicators are waning in strength, and as said earlier, $NYFANG causes a few short-term wrinkles.Credit MarketsThe high yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio performance got better aligned with the S&P 500 one, now that nominal yields have retreated.Smallcaps and Emerging MarketsReflecting the turn in the Treasury markets, both the Russell 2000 (IWM ETF) and emerging markets (EEM ETF) clearly turned higher, confirming the direction the S&P 500 has been on practically non-stop since late Mar.Inflation ExpectationsInflation expectations are going down, that‘s the conventional wisdom – and nominal yields duly follow. But the RINF ETF isn‘t buying the TIPS message all that much, proving my yesterday‘s point:(...) Have the rising inflation expectations been banished? I‘m not convinced even though they aren‘t running hotter in the wake of PPI and CPI figures, which are bound to get worse next – if copper and oil are to be trusted (they are). Remember that this is the Fed‘s stated mission for now – to let inflation run to make up for prior periods of its lesser prominence. Gold in the LimelightGold is surging higher ahead of the nominal yields retreat, as the bond vigilantes failed yet again to show up. In the meantime, the inflationary pressures keep building up...Gold, Silver and MinersAs stated the day before, seniors (GDX ETF) would lead gold by breaking above their recent highs convincingly (solidly above $35 on rising volume and bullish candle shape), as the tide in the metals has turned. The unavoidable inflation data bringing down real rates would do the trick, which is exactly what happened. Silver scored strong gains as well, yet didn‘t visibly outperform the rest of the crowd. I look for the much awaited precious metals upleg to go on, and considerably increase open profits.SummaryThe daily S&P 500 downswing is history, and the relentless push higher (best to be compared with a rising tide), goes on.Gold and miners took a cue from the surging commodities, and nominal yields retreat. Patience has been rewarded, and a close above $1,775, is what I am looking for next as the gold bottom is in.
Will Rates Rally Further, Pushing Gold Down?

Will Rates Rally Further, Pushing Gold Down?

Finance Press Release Finance Press Release 16.04.2021 16:54
The recent rally in the bond yields pushed gold prices down, but this trend won’t continue forever, as the Fed will likely be forced to step in.In March, we saw a continuation of the rally in bond yields that started in February. As the chart below shows, the 10-year real interest rates have soared from -1.06 on February 10 to -0.66 percent on March 23.What is clear from the chart is the strong correlation between the 10-year TIPS yields and the gold prices. As a consequence, the rising bond yields made gold struggle. However, in March, the real interest rates were much more choppy compared to February, when they surged decisively. It may signal a lack of fuel for the further rally, at least for a while.Now, what is important here is that despite the recent jump in the real yields, they remain extremely low from the historical point of view . And they remain well below zero! This is good news for the gold market, as the yellow metal shines the most when real interest rates are negative.Of course, the direction of change is also very important, not just the absolute level. So, the question is, will the rates increase further? Well, it’s unfortunately possible, as the improving economic outlook and risk appetite are encouraging investors to buy stocks rather than bonds.On the other hand, the rising inflation expectations suggest that real yields may struggle to increase further , or they actually may go down. As the chart below shows, the market expectations of inflation in the next 10 years, derived from the Treasuries, have risen from 0.50 at the bottom in March 2020 to 2.31 on March 24, 2021.Given the increase that has already taken place, the further rise may be limited. But the broad money supply is still rising at an accelerating pace, and investors still don’t believe that the Fed will not hike the federal funds rate to combat rising inflation. They don’t buy the new monetary framework and all the talking about letting inflation overshoot the Fed’s target. Of course, the promise to be irresponsible in the future is not very credible, but investors shouldn’t underestimate the recklessness of central bankers .You see, we live in an era of weak policymakers unable to make serious commitments, or take unpopular actions, contrary to the needs of Wall Street and the government. For example, Janet Yellen , as a Treasury Secretary, should stress fiscal discipline – instead, she praised the “go big” approach of the new administration. Congress has already passed the $1.9 trillion fiscal stimulus and the next additional spending is coming . The legislative proposal of new government expenditures on infrastructure and other priorities (such as climate change and the labor market) could collectively cost more than $3 trillion.It’s true that the additional government spending and the necessary borrowing could push up the yields (this is an important downward risk for gold). But rising interest rates could hamper the economic recovery and make government financing more costly, further ballooning already mammoth fiscal deficits . So, the Fed will likely have to step in and expand its quantitative easing program or introduce other measures, such as the yield curve control, to curb the long-term interest rates. It will weaken the dollar, thus supporting gold prices.As a reminder, the Bank of Japan has started to target the yield on 10-year government bonds at around zero percent in 2016, as it decided that the rapid monetary base expansion via large-scale asset purchases was unsustainable. More recently, the European Central Bank has announced in March the acceleration in the pace of its QE in a response to the rally in bond yields.So, do you really think that the Fed won’t follow suit? That Powell will not help Yellen, his former boss from the Fed? The sharp increase in yields would be inconsistent with the Fed’s dovish policy and the overall debt-driven economic growth. Hence, if the interest rates increase too much, be sure that the Fed will do something, providing a long-awaited support for the price of gold.What is “too much”? Not so much, at least not in the debt-trap we live in. Some analysts believe that this could occur if nominal 10-year Treasury yields rise over 2 percent, not too far from the current levels, as one can see in the chart below.Should we be surprised, given the bond bubble created by the central banks? They have kept the bond yields artificially depressed for years, so even a modest normalization – perfectly justified by the expectations of economic recovery and rising inflation – could collapse the house of cards and cause a financial crisis . Hence, although markets have become more optimistic recently, I’m afraid that bears and black swans haven’t said the last word yet. And neither has gold.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Are Metals & Miners Starting A New Longer-Term Bullish Trend?

Are Metals & Miners Starting A New Longer-Term Bullish Trend?

Chris Vermeulen Chris Vermeulen 19.04.2021 03:53
Almost in stealth mode, precious metals have begun to bottom and start a new upside price trend while the US stock market focused on the FOMC meeting a few weeks back and current economic data.  Gold, Silver, and many of the Miner ETFs recently started a moderately strong push higher – almost completely behind the scenes of the hype in the markets regarding IPOs and Bitcoin's new recent highs.All the Gold traders know that when Gold starts a new leg higher, it could mean inflation fears are being amplified in the global markets and/or fear is starting to creep back into the markets.  After the recent rally in the US major indexes and as we plow through Q1:2021 earnings, it makes sense that some fear and inflation concerns are starting to take precedence over other concerns.  Will the markets just continue to push higher and higher? Or are the market nearing some type of intermediate-term peak after rallying from November 2020? Only time will tell...The recent move in Gold and Silver prices suggests traders and investors are starting to act more aggressively to hedge against downside market risks.  My research team and I believe these upside trends may confirm an upside breakout trend in Precious Metals and Miners within 2 to 4+ weeks. You may find some of our earlier research articles related to metals, including our April 15th price targets for Gold, Silver, and Platinum, and our research from March 26th where we explore an impending miners breakout rally.Custom Metals Index Shows Breakout Starting – 433 Level Is ConfirmationLet's start by reviewing our Custom Metals Index Weekly chart, below.  The continued downward price slide from the early August 2020 peak has extended more than 8 months. Recent lows also align with the peak levels just before the COVID-19 market collapse (February 2020).  Our research suggests this level will act as a strong support level and may prompt a new bullish price leg in Precious Metals and Miners if we continue to see confirmation of this uptrend in the future. Confirmation for our research team would be a strong close above 433 on our Custom Metals Index chart – closing above the 2021 Yearly highs.We urge readers to pay close attention to the RED price channels on this Custom Metals Index chart.  These historic price channels may become very relevant in the near future.  A strong upside price breakout in precious metals may prompt a rally that extends aggressively higher – attempting to reenter this current price channel.  If this were to happen, Gold would have to rally above $2165 by July 2021.  This would certainly put Precious Metals into a new longer-term bullish price trend.Junior Gold Miners Need To Continue Higher To Confirm Breakout/Rally TrendThe following GDXJ chart highlights the base/bottom that has setup in Junior Gold Miners and also highlights the past failed breakout attempts following the CYAN downward sloping trend line.  If this current breakout attempt is valid, we will see a continued upward price trend that confirms the breach of this downward sloping trend line over the next 5 to 15+ days.  We expect this move to happen fairly quickly given how traders have shifted focus recently into hedging against downside price concerns.Miners and Junior Miners tend to lead Precious Metals prices in volatile price trends.  Junior Miners act as a leader for the Precious Metals sector as investors expect stronger Precious Metals prices to translate into stronger earnings for Junior Miners.  Therefore, when traders perceive Precious Metals prices are bottoming or starting a new uptrend, Junior Miners will likely lead the rally in metals because Junior Miners will directly benefit (bottom-line profits) if metals prices move higher. Ideally, we would like to see a strong close above $53~54 to confirm this upside breakout trend.  This past standout high/resistance level seems key for any continuation of any bullish breakout trends.14+ Months Into A New Depreciation Cycle – What Next?As the US stock market continues to push into new all-time highs almost every week and inflation concerns are starting to rise, while global central banks are still acting to support the global market recovery, it seems oddly similar to the 2001~2009 Depreciation Phase which prompted a rally in Gold from $262 to over $1900 (over 700%).  We wrote about this change in global cycle trends in our December 18, 2020 research entitled Metals & Miners Shifting Gears.The Monthly Gold chart below highlights our research into the broader Appreciation/Depreciation phases of the global markets.  Notice how Gold rallied during the last Depreciation phase (from 2001 to 2011) – even starting to rally higher just before the Depreciation phase started and continuing for nearly a year after it ended.  This happens because global traders/investors start shifting their focus into hedging against risk before the Depreciation Phase actually kicks into gear – just like what is happening right now; on the right edge of this chart.Be sure to sign up for our free market trend analysis and signals now so you don’t miss our next special report!The price Appreciation Phase ended near the end of 2019 (just before the COVID-19 market collapse). Yet, the US stock market has continued to rally higher and higher over the past 24 months, well into the start of the Depreciation Phase cycle.  This is what we call an “Excess Phase Rally” - where prices continue to trend because of momentum and herd mentality from traders.  As we are seeing right now, certain sectors, technology, and the US major indexes are still pushing to new all-time highs.  This is partially because traders continue to pile into the momentum trades/trends – chasing those profits.Gold has started to react to the Depreciation cycle in a way that suggests the global markets may eventually transition into a bit of a sideways price trend or come under some type of renewed valuation concerns over the next 3 to 5+ years.  This type of general market concern, as well as the desire to hedge against risk, may prompt a continued rally in Gold to levels above $3000 - as shown on this chart. Staying ahead of these types of sector trends is going to be key to developing continued success in these markets.  As some sectors fail, others will begin to trend higher.  Learn how BAN strategy can help you spot the best trade setups. You can learn how to find and trade the hottest sectors right now in my FREE course. For those who believe in the power of relative strength, cycles and momentum then the BAN Trader Pro newsletter service does all the work for you in determining what to buy, when to buy it, and how to take profits while minimizing downside risk. In Part II of this article, we'll highlight continued opportunities in various metals/mining stocks/ETF as well as continue to highlight our believe that Precious Metals and Miners are starting a broad market transition into the Depreciation Phase cycle.  Are you ready for it?  Are you ready for increased global stock market volatility and trends while Precious Metals may start a new 140% to 250% potential price rally?Have a great weekend!
Pausing Stocks and Gold Fireworks

Pausing Stocks and Gold Fireworks

Monica Kingsley Monica Kingsley 19.04.2021 16:28
The S&P 500 went back to relentless rallying on Friday, yet the selling wave before the close looks to indicate hesitation ahead. Even though VIX is attacking the 16 level, and the put/call ratio ticked higher, the bulls are little disturbed thus far – and they‘re unlikely to get upset. Whatever consolidation comes, would be a sideways one – one to be bought.That‘s the result of ample liquidity in the system, which is denting the rotations. Yields can go up or down, yet the sectoral adjustments to the downside aren‘t largely there, and that extends beyond the recently discussed financials. It concerns tech specifically, as the sector appears at a turning point – it defended gains: (…) without too much help from the behemoths, and value stocks surged. …. Retail sales outdoing expectations and unemployment claims dropping sharply – the economic recovery is doing fine, manufacturing expands, and inflation doesn‘t yet bite. We‘re still in the reflationary stage where economic growth is higher than the rate of inflation or its expectations.Gold loved the TLT upswing and Powell‘s assurances about not selling bonds back into the market in rememberance of eating a humble pie after the Dec 2018 hissy fit in the stock market (isn‘t this the third mandate actually, the cynics might ask). I called for the sharp gains across the precious metals board sending my open position(s) even more into the black.Miners keep supporting the upswing in both metals, and the technical picture has turned, reflecting the economic realities and commodities‘ run anounced on Wednesday. Now, it‘s up to gold and silver to catch up on what they missed since the early Aug 2020. Inflation is running hotter, and the Fed is tolerant of it, amply supplying liquidity. The gold bottom is in, and much brighter days ahead.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookNew ATHs, again and this time on rising volume – the momentum still largely remains with the bulls in spite of the late day selling pressure, and as said earlier, $NYFANG causing a few short-term wrinkles.Credit MarketsBoth high yield corporate bonds (HYG ETF) and investment grade ones (LQD ETF) have weakened, driven by the TLT retreat. This is a bearish omen unless the bulls step in, which could take a while.Technology and ValueReflecting the decline in long-dated Treasuries, tech wavered while its big names declined, and it was up to value stocks to save the day.Gold in the LimelightThe gold sector is running, and miners show no signs of stopping their solid outperformance of the yellow metal. These two have risen on Friday in spite of TLT turning lower again – the decoupling from nominal yields is getting more pronounced.The miners to gold ratio is as well pointing higher, and the higher low it made at the end of March, speaks volumes. The pressure is to go higher as the next precious metals upleg unfolds.Miners in FocusGold seniors (GDX ETF) are matched in strength by silver miners (SIL ETF), and have convincingly broken above their recent highs and the declining resistance line connecting November and January tops. The unavoidable inflation data bringing down real rates are at work, and silver can be once again expected to start doing better than gold soon, and to considerably increase the open profits.SummaryThe daily S&P 500 consolidation looms, but will be a buying opportunity – not a sign of a market top. If you disliked the staircase climb for offering precious few opportunities to join without a discounted entry, your time is approaching.Gold and miners keep surging as the commodities signposted, little hampered by the daily increase in nominal yields. Patience has been rewarded, and as we closed above $1,775, the gold bottom can be declared as in.
Gold, USDX: The Board is Set, the Pieces are Moving

Gold, USDX: The Board is Set, the Pieces are Moving

Finance Press Release Finance Press Release 19.04.2021 16:44
A culminating point has been reached. With the USD Index being backed up by solid fundamentals, can gold hold the line?Have you ever noticed how often the language of war is used in finance and economics articles? A given company is on the defensive or the offensive, a stock is pushing forward, something else is rallying, positions are being taken… who will fire first? It’s the case of continuous push and pull factors that makes military strategies and concepts relevant to the subject of money.Now, when it comes to gold and the USD Index, it’s not the great battle of our time (in reference to today’s title), as Gandalf explained to Pippin in The Lord of the Rings, but it’s a battle, nonetheless. For the yellow metal, it could even be the deep breath before the plunge. We’ll soon find out.With an epic struggle for supremacy set to unfold in the coming weeks, battle lines have officially been drawn: with the USD Index hovering near its 50-day moving average and gold recapturing its 50-day MA, negatively correlated assets have officially collided. And, as the rules of engagement specify that to the victor go the spoils, which one is likely to wave the white flag?Well, with the USD Index built on a foundation of relative fundamentals and gold a beneficiary of shifting sentiment, the former remains locked and loaded and poised to neutralize the threat. Case in point: despite the USD Index’s recent recoil, non-commercial (speculative) futures traders actually increased their net-long positions last week .Please see below: Source: COTMoreover, let’s keep in mind that when net-speculative short interest as a percentage of total open interest (based on the CoT data) became extremely high in 2014 and 2018, the USD Index recoded two of its sharpest rallies in history. How sharp? Well, let’s take a look at how things developed in the past – after all, history tends to rhyme.Let’s focus on what happened when the net speculative positions were significantly (!) negative and then they became significantly (!) positive, without paying attention to tiny moves (like the one that we saw last summer).In short, rallies that began with extreme pessimism include:The big 2008 rally (over 16 index points)The big 2009 – 2010 rally (over 14 index points)The 2011 – 2012 rally (over 11 index points)The 2013 rally (“only” over 5 index points)The big 2014 – 2015 rally (over 20 index points)The 2018 rally (over 15 index points)The current rally started at about 89, so if the “normal” (the above shows what is the normal course of action) happens, the USD Index is likely to rally to at least 94, but since the 5-index point rally seems to be the data outlier, it might be better to base the target on the remaining 5 cases. Consequently, one could expect the USD Index to rally by at least 11 – 20 index points, based on the net speculative positions alone. This means the upside target area of about 105 – 114. Consequently, a comeback to the 2020 highs is not only very likely, but also the conservative scenario.In addition, let’s keep in mind that the very bullish analogy to the 2018 rally remains intact. If you analyze the chart below, you can see that back in 2018, the USD Index rallied sharply and then corrected back to its previous highs. And in similar fashion, the current weakness is nearly identical. More importantly, though, with the 61.8% Fibonacci retracement level sitting just below the USD Index’s 50-day MA, the cavalry is already on the way.Please see below:The current correction is much bigger than what we saw in mid-April 2018, so it seems that what we see right now is more of an analogy to what we saw in June 2018. That was the first big correction after the breakout – above the 50-day moving average and the declining blue resistance line – that definitively ended the yearly decline.I marked the situation from 2018 that seems similar to what we see right now with a dashed, horizontal line. Back in 2018, the pullback ended when the USD Index moved to its first Fibonacci classic retracement level (the 38.2% one). In case of the current rally, I marked those retracements with red. The USD Index is already below the first two (taking today’s pre-market decline into account) and it seems to be on its way to reach the final – most classic – 61.8% retracement. This kind of retracement provides substantial short-term support and it’s something that’s likely to trigger a rebounding.This retracement is slightly above the 90.7 level, and at the moment of writing these words, the USD Index is trading at 91.14. This means that the USD Index can reach its very strong short-term support any day – or hour – now.The very important detail about the June 2018 decline (and bottom) is that while this was the moment after which the USD Index’s started to move higher at a slower pace, it was also the moment after which the precious metals market started to decline faster.At the beginning of the year, I wrote that the precious metals market was likely to decline and that the preceding rally was likely fake. That’s exactly what happened.Right now, I’m writing that the recent rally was also fake (a correction within a medium-term decline) and – even more importantly – it seems likely that the next downswing could take place at a higher pace than what we saw so far this year. And – just as was the case in 2018 – this upcoming (fast) decline is likely to lead to the final bottom in the precious metals sector.Of course, just because the bottom is likely to be formed in the following months, doesn’t mean that it’s in at this time or that it’s a good idea to ignore the bearish implications of the situation in the USD Index (as well as other indications pointing to lower gold prices).As further evidence, the USD Index’s 2020 decline has not invalidated its long-term breakout. And with the long-term implications taking precedence over the medium- and short-term ones, the USDX still has its guns pointed in the right direction.Adding reinforcements to its infantry, the USD Index also has another ally in the U.S. 10-Year Treasury yield. After sitting out much of the rally in 2020, the former has been following in the latter’s footsteps since the New Year’s Day. And while the U.S. 10-Year Treasury yield’s frailty has been a negative over the last two weeks, the dynamic could be about to flip.Please see below:Trending in the opposite direction of the USD Index futures, non-commercial (speculative) futures traders have moved from net-long to net-short the U.S. 10-Year Treasury Note . For context, bond prices move inversely of yields, so a lower U.S. 10-Year Treasury results in a higher U.S. 10-Year Treasury yield. And after non-commercial (speculative) futures traders reduced their long positions by nearly 43,000 contracts and increased their short positions by more than 44,000 contracts, speculators went from being net-long nearly 84,600 contracts to net-short nearly 2,700 contracts.Please see below:As a result, if the U.S. 10-Year Treasury yield and the USD Index engage in an all-out offensive, their military might could indicate the death knell for the precious metals. Case in point: if you analyze the table below, you can see that gold, silver and the mining stocks often move inversely to the U.S. dollar.The bottom line?Given the magnitude of the 2017-2018 upswing , ~94.5 is likely the USD Index’s first stop. And in the months to follow, the USDX will likely exceed 100 at some point over the medium or long term.Keep in mind though: we’re not bullish on the greenback because of the U.S.’s absolute outperformance. It’s because the region is doing (and likely to do) better than the Eurozone and Japan, and it’s this relative outperformance that matters , not the strength of just one single country or monetary area. After all, the USD Index is a weighted average of currency exchange rates, and the latter move on a relative basis.In conclusion, the generals have mapped out their strategies, soldiers have manned the perimeter, and the loser of the upcoming battle will likely end up losing the war. However, with the precious metals being outmanned and outgunned, the USD Index will likely plant its victory flag, while gold, silver and the mining stocks are forced to retreat and regroup. As a result, a major fallback is likely before the precious metals can resume their long-term uptrend. Due to the USD’s breakdown below the 50% retracement, they could decline in the very near term (while gold rallies a bit more – say to $1,800 or so), but don’t let that trick you into thinking that the next big move is going to the upside. In my view, that’s actually likely to be an important top that’s then going to be followed by an even more important decline in the precious metals and mining stocks. Then, after several weeks or months of declines, PMs can bottom and finally soar without huge declines on the horizon.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Gold Rebounds Amid Positive Economic Reports

Gold Rebounds Amid Positive Economic Reports

Finance Press Release Finance Press Release 20.04.2021 10:55
Several economic indicators have surprised us on the positive side. Nevertheless, the price of gold has rebounded.Finally! The price of gold has been rising recently . As the chart below shows, the yellow metal rebounded from the late March bottom of $1,684 to above $1,770 on Friday (Mar. 16). This could be a promising start to the second quarter of 2021, which looks better than the first.As you know, gold struggled at the beginning of the year, falling under strong downward pressure created by the improving risk appetite and rising bond yields . But the strength of these factors has begun to fade. You see, it seems that economic confidence has reached its maximum level, and it could be difficult for markets to become even more euphoric.Please take a look at the chart below which shows the level of credit spreads – as you can see, they have fallen to very low levels, which implies that they won’t get much lower than they are right now. So, it appears that the next big move will rather be a rise in credit spreads or a decline in economic confidence.Second, it seems that the rally in bond yields has run out of fuel , at least for a while. The U.S. long-term real interest rates reached their peak of minus 0.56% on March 18 of this year. Since then, they are in a sideways or even downward trend, declining to almost -0.70% last week, as you can see in the chart below.As I explained earlier several times, the markets didn’t buy the Fed’s story of allowing inflation to rise substantially without hiking interest rates for several weeks or even months. However, it seems that Powell and his colleagues have finally managed to convince investors that they are really serious about the new framework, which puts full employment over inflation.Of course, there are also positive geopolitical factors contributing to the rebound in the gold prices . The tensions between the U.S. and China, as well as the U.S. and Russia, have been rising recently. However, it seems that the decline in bond yields allowed gold to catch its breath, and that the macroeconomic outlook – including the credit spreads, interest rates, inflation, monetary policy and fiscal policy – will remain the key driver of gold prices throughout the year.Implications for GoldWhat does all this mean for the price of the yellow metal? Well, the recent jump in the price of gold is encouraging. What is important here is that this rebound occurred amid the flood of positive economic data . For instance, the initial jobless claims have decreased to 576,000, a lower level than expected and the lowest since the pandemic started, as the chart below shows.Additionally, retail sales surged 9.8% in March , following a 2.7% decline in February, while the Fed’s Beige Book reported that “national economic activity accelerated to a moderate pace from late February to early April”. Additionally, both the Philadelphia Fed manufacturing index and the Empire State manufacturing index surprised us on the a positive side.The fact that gold held its gains and continued the rebound even after the publication of several positive economic reports is bullish . Of course, it might be simply the case that the reduction in the real interest rates simply outweighed other indicators, but it’s also possible that gold’s bears got tired.Indeed, the sentiment was so negative in the gold market that it couldn’t get much worse than it already was. Gold shined brightly during the Great Lockdown and economic crisis . But now, when the economy is recovering, gold has become persona non grata . However, this might imply that we are either close to or we have already reached the bottom. Only time will tell, of course, but the macroeconomic outlook seems to be rather friendly for the price of gold, especially if the real interest rates stop rising or even start declining again.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Gold Continues to Rebound, Despite Hawkish Powell’s Letter

Gold Continues to Rebound, Despite Hawkish Powell’s Letter

Finance Press Release Finance Press Release 22.04.2021 15:52
The price of gold rebounded further, despite hawkish Powell’s letter to Senator Rick Scott.The second quarter of 2021 started much better than the first one for the gold bulls . As the chart below shows, the yellow metal rebounded from the late March bottom of $1,684 to $1,778 on Tuesday (April 20).Is it a temporary recovery in a long, downward slide or a return to the bull market that started in 2019? Well, it’s probably too early to determine whether that’s the case. What is, however, crucial here is that the yellow metal has managed to go up, despite some bearish news. The most important fact is that Powell has replied to the letter from Senator Rick Scott on rising inflation and public debt . The Fed Chair’s reply was rather hawkish , as he said that any overshoot of inflation target would be limited:We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period (…) we are fully committed to both legs of our dual mandate – maximum employment and stable prices (…) We understand well the lessons of the high inflation experience in the 1960s and 1970s, and the burdens that experience created for all Americans. We do not anticipate inflation pressures of that type, but we have the tools to address such pressures if they do arise.Although Powell didn’t say anything surprising, his tone and emphasis on the commitment to stable prices could be interpreted as generally hawkish and, thus, negative for the gold prices. However, the yellow metal continued its rebound, which is encouraging .Implications for GoldSo why has gold been rising recently? Well, in a sense, the reason might be simple: the sentiment was so negative that the downward trend had to reverse. However, there are also some fundamental factors at play here. First of all, the rallies both in the bond yields and the US dollar have stalled . As the chart below shows, both the greenback and the real interest rates have receded from their March peaks..The declines in the bond and forex markets enabled gold to catch its breath. Of further importance is that they started falling when it became clear that the Fed would be more dovish and tolerant of higher inflation than was originally believed by the markets.Second, there has been a surge in global coronavirus cases which renewed a demand for the safe-haven assets, such as gold . Also, in the US, the number of confirmed cases and hospitalizations is increasing in some areas of the country, despite the vaccination progress. That is the effect of the new variants of the virus and the pandemic fatigue, i.e., many people tired of it have dropped their infection control measures.Third, inflation is accelerating , which is becoming increasingly visible. For example, the latest IHS Markit U.S. Manufacturing PMI shows that costs and charges have historically elevated in March.Supplier lead times lengthened to the greatest extent on record. At the same time, inflationary pressures intensified, with cost burdens rising at the quickest rate for a decade. Firms partially passed on higher input costs to clients through the sharpest increase in charges in the survey’s history.Commenting on the numbers, Chris Williamson, Chief Business Economist at IHS Markit, said:Raw material prices are increasing at the sharpest rate for a decade and factory gate selling prices have risen to a degree not seen since at least 2007. The fastest rates of increase for both new orders and prices was [sic] reported among producers of consumer goods, as the arrival of stimulus cheques in the post added fuel to a marked upswing in demand.What matters here is that the inflationary pressure is likely to remain with us for a while, despite the pundits’ claims that it’s triggered merely by temporary factors. In the 1970s, they were talking the same – until stagflation emerged and gold shined .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Will a Fiscal Revolution Raise Gold to the Throne?

Will a Fiscal Revolution Raise Gold to the Throne?

Finance Press Release Finance Press Release 23.04.2021 16:29
Revolution, baby! There is growing acceptance for an aggressive fiscal policy, which could be supportive for gold prices from the fundamental, long-term point of view.We live in turbulent times. The pandemic is still raging and will most likely have lost lasting effects on our society. But a revolution is also happening right before our eyes. And I don’t mean another storming of the U.S. Capitol or the clash of individual investors with big fish on Wall Street. I have in mind something less spectacular but potentially more influential: a macroeconomic revolution.I refer here to the growing acceptance of easy fiscal policy . In the aftermath of the Great Recession , the central banks adopted an aggressive monetary policy , slashing interest rates to almost zero and introducing quantitative easing . It has become a new norm since then.But fiscal policy was another kettle of fish. Although almost nobody cared about balanced government budgets, people at least pretended to worry about overly large fiscal deficits and an overly quick accumulation of public debt . For example, while Obama wanted $1.8 trillion in fiscal stimulus in a response to the global financial crisis of 2007-09, Congress passed a package of about $800 billion, as Republicans opposed larger spending. But in March 2020, Congress passed the CARES act worth about $2 trillion (and additional significant stimulus in December 2020), with the full support of Republicans.Even Germany – the country famous for its fiscal conservatism – ran a fiscal deficit in 2020 and – what’s more – agreed to issue bonds jointly with other EU countries, although it was previously a taboo. The International Monetary Fund (IMF), another bastion of economic orthodoxy, which advocated for austerity and balanced budgets for years, gave up during the epidemic and started to call for more fiscal stimulus to fight the economic crisis .And this fiscal revolution is already seen in data. As the chart below shows, the U.S. fiscal deficit has increased from 4.6 percent of GDP in 2019 (which was already at an elevated level) to 15 percent of GDP in 2020, the highest level in the post-war era.According to the IMF’s Fiscal Monitor Update from January 2021 , fiscal deficits amounted to 13.3 percent of GDP , on average, in advanced economies, in 2021, a spike from 3.3 percent seen in 2019. As a consequence, the gross global debt approached 98 percent in 2020 and it’s projected to reach 99.5 percent of the world’s GDP by the end of this year.What is important to note here is that government support wasn’t limited mainly to the financial institutions and big companies (such as automakers), as was the case in 2009, but it was distributed more widely. There was a huge direct money transfer to Main Street, including checks for practically all citizens. This is important for two reasons.First, money flowing into the economy through nonfinancial institutions and people’s accounts may be more inflationary. This is because money doesn’t stay in the financial market where it mainly raises asset prices, but it’s more likely to be spent on consumer goods, boosting the CPI inflation rate . Higher officially reported inflation (and relatively lower asset prices) should support gold , which is seen by investors as an inflation hedge .Second, the direct cash transfer to the people creates a dangerous precedent. From now, each time the economy falls into crisis, people will demand checks. It means that fiscal responses would have to be increasingly larger to meet the inflated expectations of the public. It also implies that we are approaching a universal basic income, with its mammoth fiscal costs and all related negative economic and social consequences.Summing up, we live in revolutionary times. The old paradigm that “central banks are the only game in town” has been replaced by the idea that fiscal policy should be more aggressively used. Maintaining balanced budgets is also a dead concept – who would care about deficits when interest rates are so low?However, assigning a greater role to fiscal policy in achieving macroeconomic goals increases the risk of higher inflation and macroeconomic instability, as politicians tend to be pro-cyclical and reckless. After all, the economic orthodoxy that monetary policy is better suited to achieve macroeconomic stability didn’t come out from nowhere, but from awful experiences of the fiscal follies of the past. I’m not a fan of central bankers, but they are at least less short-sighted than politicians who think mainly about how to win the next election and stay in power.Hence, the growing acceptance of easy fiscal policy should be positive for gold prices , especially considering that it will be accompanied by an accommodative monetary policy. Such a policy mix should increase the public debt and inflation, which could support gold prices. The caveat is that investors have so far welcomed more stimulus flowing from both the Fed and the Treasury. But this “go big” approach of Powell and Yellen increases the longer-term risk for the economy, which could materialize – similar to the pandemic – sooner than anyone thought.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Intraday Market Analysis – Triple-Tested Support

Intraday Market Analysis – Triple-Tested Support

John Benjamin John Benjamin 26.04.2021 08:32
US 30 bounces off key supportThe Dow Jones recoups losses as investors expect some leeway for President Biden’s fiscal plans.The index has found support at 33700. There have been three consecutive tests at this level which is a sign that buyers remain in control of the price action. A rally back above 34150, the base of the latest sell-off could convince traders of the underlying strength.A new high at 34400 would be the next target should momentum picks up. As the RSI ventures again into the overbought area, 33700 is a critical support in case of a pullback.GBPUSD retreats in search of supportThe pound is looking for support after a better-than-expected PMI suggests economic resilience.The latest sharp sell-off came from the psychological level of 1.4000, also a major resistance on the daily chart. Its breach could revive the thirteen-month-long uptrend.As for now, an oversold RSI has prompted some short-covering. 1.3810 is the immediate support to test the strength of rebound.Further down, 1.3720 will need to see solid buying interest to save the chance of a reversal.EURAUD tests key supply areaThe euro climbed back after the euro zone’s service PMI recovered to 50.3. The previous sell-off has met robust support at 1.5420. The subsequent rally above 1.5530 suggests that buyers are still committed to pushing higher.The price may test the supply area at 1.5670 for the third time. Profit-taking from short-term traders would be expected.A bullish breakout may trigger a broader recovery as the short side rush to cover their bets. On the downside, 1.5500 would be a key support to monitor.
No Upsetting the Apple Cart in Stocks or Gold

No Upsetting the Apple Cart in Stocks or Gold

Monica Kingsley Monica Kingsley 26.04.2021 15:35
The tax hike proposal shock is over, and S&P 500 took again on the ATHs on Friday. Buying pressure throughout the day lasted almost till the closing bell, and is likely to continue this week as well. And why shouldn‘t it – has anything changed? The artificial selling any capital gains tax hike would generate, is likely to come before year end – not now:(…) Look still though how little has changed, as if the tax raising plans haven‘t been around since the infrastructure bill or implicitly even before. It‘s still April, and markets are pricing in not only this select reality, but broader tax increases coming. Yes, they have woken up, and the reflation paradigm is getting an unwelcome companion. This hit won‘t bring down the bull, but will slow it down – and the implications for broader economy will only hasten the pronounced advent of the commodities supercycle (well underway since the corona deflationary crash last year). The move towards risk-on was clearly there, overpowering the USD bulls yet again as the dollar bear market has reasserted itself. It‘s not just about EUR/USD on the way to its late Feb highs, but about the USD/JPY too – the yen carry trade is facing headwinds these days, acting as a supportive factor for gold prices. While these went through a daily correction, commodities pretty much didn‘t – lumber is powering to new highs, agrifoods didn‘t have a down day in April, copper and oil scored respectable gains. The market is in a higher inflation environment already, and it will become increasingly apparent that commodity-led inflation is here to stay.Back to stocks and bonds, the S&P 500 took well to a daily rise in Treasury yields – and that‘s the key factor overall. The turnaround was most clearly seen in tech heavyweights but defensive sectors such as consumer staples or utilities didn‘t do well (they‘re interest rate sensitive, after all), and Dow Jones Industrial Average traded closer to the optimistic side of the spectrum. The second piece of the puzzle came from value stocks and financials, which are working to put an end to their own shallow correction – just as you would expect when rates take a turn higher.So, another volatility spike has been banished, but option traders aren‘t yet satisfied, and keep piling into protective instruments. I view this as a fuel of the upcoming rally continuation, unless the tech‘s earnings batch doesn‘t disappoint as Netflix subscriber base growth did.One more argument in favor of the S&P 500 upswing, comes from the smallcaps – the time of their outperformance, is approaching. Likewise emerging markets are starting to do better, and the dollar effect is part of the explanation.Gold took sensitively to the rise in yields, and retreating dollar didn‘t lift it up really. The yellow metal disregarded proportional increase in inflation expectations, and so did the miners – indicating that a brief soft patch in the precious metals sector can‘t be excluded. This doesn‘t change my Friday‘s thoughts that:(…) The precious metals upleg has started, we‘re in a real assets super bull market, and this little hiccup won‘t derail it. The sad implication would actually drive it as capital formation would be hampered, unproductive behaviors encouraged, and potential output lowered. Pretty serious consequences – add to which inflation as that‘s what the Fed ultimately wants, and the recipe for more people falling into higher tax brackets through illusory gains, is set. Then, as inflation starts firing on all cylinders – a 2022-3 story when the job market starts overheating – the pain would be felt more keenly. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookIt‘s not an issue that the two latest upswings happened on decreasing volume as I view the preceding modest volume spike as a sign of weak selling turning into accumulation. There is plenty of doubt to drive further S&P 500 gains.Credit MarketsBoth high yield corporate bonds to short-term Treasuries (HYG ETF) and investment grade ones (LQD ETF) have risen on Friday, and the divergence to long-dated Treasuries is another key factor driving the risk-on return conclusion.Technology and FinancialsThe $NYFANG strength was the key deciding factor in the S&P 500 upswing, and value stocks didn‘t stand in the way much either. Financials joined in the upswing by tech are a sign of the shallow correction drawing to its end.Gold & Miners WeeklyCompare this chart to the one that I published on Thursday – the red candle smacking of reversal is actually just an initial rejection in my view. It‘ll take a while to return back above the 50-day moving average, but that‘s a question of time merely. Gold miners are still outperforming, and the upside momentum in the gold sector merely paused. We may see a brief pullback as the bears try their luck, but it will be only a temporary setback – there is no telling weakness in any of the markets I am looking at that would indicate otherwise.Gold, Silver and Key RatioThe copper to 10-year Treasury yield ratio shows that the markets aren‘t buying the transitory inflation story – the rush into commodities goes on, and justifiably so. Just look how much silver has been resilient, and the white metal is uniquely positioned to benefit both from the economic recovery, forced shift into green economy, and building monetary pressures.Seniors vs. JuniorsThroughout the 10+month long correction, juniors had been the more resilient ones, but it was the seniors that I called to lead gold out of the bottom. And they did, meaning that juniors had underperformed over the coming month clearly. Once animal spirits return even more to the precious metals sector, their outperformance is likely to return as the market appetite for ounces in the ground grows. We aren‘t there yet, but the new upleg is well underway.SummaryThe S&P 500 turned around convincingly, and new highs are a question of a rather short amount of time – be prepared though for headline risks should we get an (unlikely) earnings disappointment.Gold and miners are in consolidation mode as they failed to take advantage of plunging dollar and rising commodity prices, but the precious metals sector is likely to play a catch up relative to commodities as its sluggish post Aug performance would get inevitably forgotten.
Should you buy Microsoft and Google before earnings?

Should you buy Microsoft and Google before earnings?

Kseniya Medik Kseniya Medik 27.04.2021 13:09
What will happen? Two stock giants – Microsoft and Google – will publish earnings reports for the first quarter of 2021 on Tuesday after the market closes. Microsoft will release their financial results after midnight on April 27 at 00:30 (formally April 28) MetaTrader time (GMT+3), while Google at the midnight. By the way, the stock market is open from 16:30 to 23:00 MT (GMT+3). What to expect? Google is expected to deliver $15.45 earnings per share, while Microsoft – $1.76. How to trade on earnings? Check the economic calendar at the time of release to compare the actual data with the estimate. If the earnings come out better than expected, the stock price will move up. In case of worse-than-forecasted earnings, the stock price will move down. Microsoft outlook Microsoft hit an all-time high yesterday, breaking above $260.00. Therefore, the way up to the next round number of $270.00 is open. Since expectations are high, Microsoft is rallying up even ahead of the earnings report. Forecasts are bullish, thus the stock is likely to keep climbing up. However, the RSI indicator is just below the 70.00 level. Once it breaks above this level, the stock becomes overbought and the reverse down may occur. Thus, be aware of the support levels at the low of April 14 at $255 and the psychological mark of $250. If the stock price goes down, it is likely to stop ahead of these levels rather than break out them. Google outlook Analysts forecast that Google is likely to beat market estimates as its main source of profit – the advertising segment – recovered. Let’s look at the chart. If earnings are encouraging, Google may rise to the next round number of $2400, but the RSI indicator went above 70.00, signaling the overbought conditions. Therefore, the rally up shouldn’t last long. Support levels are at the recent low of $2250 and the 50-day moving average of $2140. Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
Will Euro and Gold Go Up With Pandemic Upturn in Euro Area?

Will Euro and Gold Go Up With Pandemic Upturn in Euro Area?

Finance Press Release Finance Press Release 27.04.2021 16:39
The worst may already be behind the euro area’s economy. This bodes well – both the euro, as well as gold, can benefit from it.The Governing Council of the European Central Bank met last week, keeping its monetary policy unchanged. The inaction was widely expected - no surprises here. The June meeting could be much more interesting as the ECB will have to decide whether or not to slow its bond buying under the Pandemic Emergency Purchase Programme that was accelerated in the second quarter of the year. Given the dovish stance of the European policymakers, and the bank’s pledge to provide the markets with favorable financing conditions during the pandemic, we shouldn’t expect any tapering soon.Certainly, there are important dovish parts of the latest ECB’s statement on its monetary policy . It stems from the grim economic situation in the euro area. The real GDP declined by 0.7 per cent in the fourth quarter of 2020, and it is expected to decrease again in the first quarter of 2021. The nearest future doesn’t look promising:The near-term economic outlook remains clouded by uncertainty about the resurgence of the pandemic and the roll-out of vaccination campaigns. Persistently high rates of coronavirus (COVID-19) infection and the associated extension and tightening of containment measures continue to constrain economic activity in the short term.However, investors should always look beyond the near-team outlook. In the medium-term, the situation in the euro area looks much better. As the ECB notes, this is because the current virus wave seems to have peaked in Europe, while the pace of vaccination is accelerating:Looking ahead, the progress with vaccination campaigns, which should allow for a gradual relaxation of containment measures, should pave the way for a firm rebound in economic activity in the course of 2021.Furthermore, the European Union’s 750 billion euro recovery fund has cleared a key court challenge. Last week, the Germany’s constitutional court dismissed objections to the European aid package.All these factors are positive for the euro and, thus, also for the price of gold. As you can see in the chart below, gold was highly correlated with the spread between the American and German long-term government bond yields - the widening divergence in the US and European interest rates that started in August 2020 pushed the yellow metal down.Implications for GoldThe third wave of pandemic has already peaked in Europe; therefore, the old continent may somewhat catch up with the US. This could narrow the divergence in yields, creating downward pressure on the greenback while supporting the gold prices .Another positive factor for the euro and the yellow metal is the fact that although inflation jumped in both the US and the euro area, it’s much higher in the former country as the chart below shows. So, the purchasing power parity could support the common currency, as well as gold, against the greenback.What’s funny here is that Lagarde , just as Powell , argued that inflation “has picked up over recent months on account of some idiosyncratic and temporary factors and an increase in energy price inflation”. Sure, some idiosyncratic and temporary factors helped inflation to soar, but there are always some idiosyncratic and temporary factors. All the same, the central bankers point to them only when inflation rises, never when it declines. They always refer to these factors to justify their dovish bias and easy monetary policy.Of course, it might be the case that inflation won’t materialize, just like it never did after the Great Recession . But this time may be really different due to the surge in the broad money supply and a huge increase in government spending in the form of direct cash transfers to citizens who are hungry for traveling, eating in restaurants, and generally a normal life with all its money-spending. So, inflation is the wild card, which makes it reasonable to have some gold in investment portfolios . Investors should remember that gold is an investor’s asset rather than a demand asset, which means that in periods of reflation , gold initially lags commodities, only to outperform them and shine brightly in later phases.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
How to trade EUR/USD ahead of US GDP?

How to trade EUR/USD ahead of US GDP?

Kseniya Medik Kseniya Medik 29.04.2021 11:26
The Federal Reserve left the policy unchanged yesterday and signaled that it wouldn’t be ready to tighten the policy anytime soon. After that meeting, the USD dropped and EUR/USD rocketed to the two-months high.Today, the pair has already reversed down as the demand for the greenback resurged. Fresh worries over the increase in coronavirus cases in India are worsening the market sentiment and therefore supporting the safe-haven US dollar.Besides, the USA will publish its Advance GDP growth at 15:30 MT (GMT+3), which is widely expected to beat forecasts. If the data is really stronger-than-expected, the USD will get another stimulus to rise and EUR/USD will fall. Nevertheless, in the long term, EUR/USD is likely to move higher as the focus will shift to the European economic recovery.ForecastAccording to Westpac, “EUR/USD looks set to remain in the upper half of its 1.17-1.22 range, but is likely to struggle towards range resistance.”Technical tipsIn the long term, EUR/USD is moving in a downtrend, while in the short term, it’s trending up. After breaking the upper trend line, the pair reversed down as the RSI indicator came closer to 70.00, signaling the pair is overbought. It may fall to the 100-day moving average of 1.2050, but it’s unlikely to break this level on the first try as it’s strong support, which the pair has failed to cross several times. So, this decline should be just a correction ahead of the further rally up. If it bounces off the 1.2050 mark, on the way up it will meet resistance levels at yesterday’s high of 1.2125 and the high of February 25 at 1.2175.Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
Will Powell Lull Gold Bulls to Sweet Sleep?

Will Powell Lull Gold Bulls to Sweet Sleep?

Finance Press Release Finance Press Release 29.04.2021 16:20
The Fed left its monetary policy unchanged. However, the lack of any action amid economic recovery is dovish – good news for gold.On Wednesday (Apr. 28), the FOMC has published its newest statement on monetary policy . The statement wasn’t significantly altered. The main change is that the Fed has noticed the progress on vaccinations and strong policy support, and that, in consequence, the economic outlook has improved.Previously, the US central bank said that indicators of economic activity and employment “have turned up recently, although the sectors most adversely affected by the pandemic remain weak”, while now these indicators “have strengthened”, while “the sectors most adversely affected by the pandemic remain weak but have shown improvement”. So, the Fed acknowledged the fact that the economy has significantly recovered .Similarly, the US central bank is no longer considering the epidemic as posing “considerable” risks to the economic outlook. Instead, the pandemic “continues to weigh on the economy, and risks to the economic outlook remain”. It means that the Fed has become more optimistic and does not see risks as considerable any longer. This is bad for the price of gold although it’s not a very surprising modification, given the progress in vaccinations. However, no hawkish actions will follow, so any bearish impact for gold should be limited.Another important alteration is that inflation no longer “continues to run below 2 percent”, but it “has risen, largely reflecting transitory factors”. This would be normally a hawkish change with bearish implications for gold. But the Fed doesn’t worry about inflation and is not going to hike the federal funds rate anytime soon, even when inflation remains above the target for some time. As Powell pointed out, “the economy is a long way from our goals, and it is likely to take some time for substantial further progress to be achieved.” Thus, gold bulls may sleep peacefully .Implications for GoldIndeed, they can relax with Mr. Powell on guard. The Fed Chair has reiterated during his press conference that the US central bank is not going to tighten its dovish stance and reduce the quantitative easing:It’s not time to start talking about tapering. We'll let the public know well in advance. It will take some time before we see substantial further progress. We had one great jobs report. It is not enough to start talking about tapering. We'll need to see more data.Uncle Jay and his bedtime stories… about inflation that is only “transitory”. Once upon a time,the PCE inflation [is] expected to move above 2% in the near term. But these one-time increases in prices are likely to have only transitory effects on inflation.Well, sure. Nonetheless, this is the favorite story of central bankers all over the world told to naive citizens. Just wait for the April inflation readings – they will be something! Of course, it is going to be too early to declare persistently higher inflation, but I’m afraid that the Fed may be too carefree about such a possibility.So, in the aftermath of the generally dovish FOMC meeting, the dollar slid yesterday, while the price of gold went up . Gold continued its recovery from the March bottom, as depicted in the chart below. This makes sense: after all, the Fed reiterated that it would maintain its current ultra easy stance for the foreseeable future, despite the fact of acknowledged improved economic outlook.In other words, the Fed’s inaction made the US central bank more dovish given the better economic outlook and higher inflation. The statement’s language about the coronavirus and the economy was more optimistic, but inflation was considered to be transitory and no hawkish actions were signaled. So, the recent FOMC meeting should be positive for the gold prices from the fundamental point of view , although gold may continue its recent, generally lackluster performance for a while. Of course, the expansion of Fed’s accommodative monetary policy would be much better for the yellow metal, but the lack of any hawkish signals could still clean the room for gold for further upward moves.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Gold Sings a “Hot N Cold” Song

Gold Sings a “Hot N Cold” Song

Finance Press Release Finance Press Release 30.04.2021 18:18
Although spring has begun, we can still find ourselves in winter, or even summer. Gold may benefit from such a seasonal aberration.Oh, how wonderful, spring has finally started, hasn’t it? We have April, after all. Well, in calendar terms, it’s indeed spring, but economically it can be summer already or still the beginning of winter. How so? I refer here to Kondratiev cycles (also known as Kondratieff cycles or Kondratyev cycles).As a reminder, Nikolai Kondratiev was a Russian economist who noted in the 1920s that capitalist economies experience long super-cycles, lasting 40-60 years (yup, it’s not a very precise concept). His idea was that capitalism was not on an inevitable path to destruction, but that it was rather sustainable and cyclical in nature. Stalin didn’t like this conclusion and ordered a prison sentence and, later, an execution for Kondratiev. And you thought that being an economist is a boring and safe profession!The Kondratiev cycles, also called waves, are composed of a few phases, similar to the seasons of the year. In 2018, I defined them as follows:Spring : economic upswing, technological innovation which drives productivity, low inflation , bull market in stocks, low level of confidence (winter’s legacy).Summer : economic slowdowns combined with high inflation and bear market in stocks, this phase often ends in conflicts.Autumn : the plateau phase characterized by speculative fever, economic growth fueled by debt, disinflation and high level of confidence.Winter : a phase when the excess capacity is reduced by deflation and economic depression, debt is repaid or repudiated. There is a stock market crash and high unemployment rate , social conflicts arise.However, other economists define these phases in a slightly different manner. For them, spring is an inflationary growth phase, summer is a period of stagflation (inflationary recession ), autumn a deflationary growth period, while winter is a time of deflationary depression.So, which phase are we in? That’s a very good question. After all, the whole concept of Kondratiev cycles is somewhat vague, so it’s not easy to be precise. But some experts believe that we are likely in the very early part of the winter after a very long autumn . Indeed, there are some important arguments supporting such a view.First, we have been experiencing a long period of disinflation (and later just low inflation), a decline in the bond yields , and economic growth fueled by debt. I refer here to the time from the end of the Great Recession until the Covid-19 pandemic , but one can argue that autumn lasted since the early 1980s, when both interest rates and inflation peaked, as the chart below shows.Second, winter is believed to be a depression phase with stock and debt markets collapsing, but with commodity prices increasing. And this is exactly what we are observing right now. I refer here to the rally in several commodity prices. This is at least partially caused by the disruption in the supply chains amid the epidemic in the U.S. and worldwide pandemic, but if the bull market in commodities sets in for good, this could be a negative harbinger for the stock market. After all, more expensive raw materials eat into corporate profits.Third, winter is thought of as a period that tears the social fabric of society and deepens the inequalities. The data is limited, but the coronavirus crisis has been one of the most unequal in modern U.S. history, as its costs have been borne disproportionately by the poorer parts of society that have been unable to work online.So, “winter is coming” may be a belated warning, as winter could have already begun. Later during this period, we could see bankruptcies of firms and financial institutions, and even some governments, as a delayed consequences of the coronavirus crisis. This is bad news for the whole of Westeros and its economy, but good for gold. Investors who don’t like the cold should grab a golden blanket to hedge them from the winter.However, in 2018, I expressed the opinion that summer may come in the 2020s, as the debts are rising and the inflationary pressure is growing:As the global economy recovered and now expands, inflation is low, while stocks still rally, we enjoy spring. This is why gold has remained in a broad sideways trend in the last few years. However, as we are on the edge of the next technological revolution, confidence is finally rising and there are worries about higher prices, and we could enter the summer phase in the not-so-distant future.And I still believe that my opinion makes sense. Indeed, after the global financial crisis of 2007-9, we have seen several spring features: low inflation, a bull market in stocks, and a low level of confidence (after all, there was “the most hated rally in the stock market”), which was a legacy of winter, i.e., the collapse of Lehman Brothers and the following economic crisis .And summer is generally a period of stagflation, which is exactly what I’m expecting. You see, after a strong economic recovery in the nearest quarters, the U.S. economy is likely to return to a mediocre pace of economic growth, but with much higher inflation. After all, there is strong monetary and fiscal stimulation ongoing right now, another feature of summer. Meanwhile, winter is generally a deflationary period, so the specter of inflation rather suggests that summer may be coming and investors should hedge themselves against waves of gold.Luckily, gold offers its protection not only against winters, but also against summers . Indeed, gold performs the worst during autumns, when there is disinflation, like in the 1980s and the 1990s, and the best during winters (due to the economic crisis – remember the 2000s?) and the summers (due to high inflation – remember the 1970s?).Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get a 7-day no-obligation trial for all of our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Taper Smoke and Mirrors

Taper Smoke and Mirrors

Monica Kingsley Monica Kingsley 03.05.2021 15:03
Once in a while, stocks closed in red – is that a reversal or the most the bears could hope for these days? Thursday‘s hanging man got its follow through, yet the bulls staged a rebound into the close. Perhaps that‘s as good as the selling pressure gets, for I think the path of least resistance is still higher in S&P 500.If you look at the VIX or the put/call ratio, Friday‘s setback is readily apparent, and stocks seem ripe for an upswing now. Fed‘s Kaplan did its job s with the taper talk, yet I think he played the bad cop part – the Fed will really act ostrich in the face of not so transitory inflation, for as long as the Treasuries market doesn‘t throw a tantrum.And the 10-year yield has been quite well behaved lately, closing at 1.65% only on Friday. The April calm seems to be over, and I‘m looking for the instrument to trade at 1.80% at least at the onset of summer. Then, let‘s see how the September price increases telegraphed by Procter & Gamble influence the offtake – will the price leader be followed by its competitors? That‘s one of the key pieces of the inflation stickiness puzzle – and I think others will follow, and P&G sales and profitability won‘t suffer. The company is on par with Coca Cola when it comes to dividends really.Once there, we would progress further in the reflation cycle when inflation is no longer benign and anchored. We‘re though still quite a way from when the Fed tries to sell rising rates as proof of strengthening economic recovery – once the bond market would get to doubt this story though, it would be game over for its recent tame behavior.Friday‘s retreating Treasuries though didn‘t lift gold, and neither helped miners – it‘s not that inflation expectations would be sending a conflicting signal, as these slightly receded too. Inflation at the moment is probably still too low for the complacent market lulled to sleep by the transitory story, but look for that to change.Once the reality of modern monetary theory driven spending in eternity does result in higher inflation biting into real rates even more, the below quote would need to be updated:(…) It‘s as if the market place didn‘t deem inflation at the moment too high, i.e. as if real rates were actually rising (those believing so are in for a surprise). Personally, I find it odd that the transitory inflation story is still getting some ear, and wonder when last have the lumber, oil, copper, iron, nickel, zinc, corn, soybean (and soon also coffee) prices been checked.The taper story being revealed for a trial baloon that it is, would quickly reverse Friday‘s sharp USDX gains, where particularly the USDJPY segment is worth watching. In the end, the debasement of fiat currencies against real assets would continue, and accelerate as the dollar goes fully onto strategic defensive in 2H 2021 again.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookStocks declined, volume remained elevated – so is this the start of a downswing, or rather its closing stage? In spite of weak smallcaps and emerging markets, it‘s the latter – thanks to the credit markets, including emerging market ones.Credit MarketsIt‘s the high yield corporate bonds intraday recovery that appears key here, for the junk bonds joined the investment grade ones and long-dated Treasuries. The dip is being bought in the credit markets.Technology and FinancialsTechnology recovered from steep intraday losses, and so did $NYFANG. To complete the picture, value stocks were out of the daily favor too.S&P 500 Market BreadthIt‘s not just the advance-decline line or advance-decline volume to pay attention to right now, but the new highs new lows too. All three indicate that we are nearing a local bottom.Gold and Miners Short-TermGold is quite holding up, yet not totally convincingly, especially when miners are examined. This setup screams danger as the retreating nominal yields were ignored on Friday. But...Gold and Miners Long-TermThe copper to 10-year Treasury yield isn‘t breaking lower, and neither is gold. The stage is set for the yellow metal (and silver naturally too) to catch up and start outperforming the commodities, especially in the 2H of 2021. The miners to gold ratio‘s posture is curious to say the least. Is it a fake breakdown along the late Mar lines, or it it attempting to lead lower in earnest? The 2018 and 2019 gyrations are more applicable than the uniquely deflationary corona crash in my view – but the miners need to turn higher and lead relatively shortly to confirm.Crude OilCrude oil quite steeply declined on Friday, but the daily downswing doesn‘t have the characteristics of a reversal. The post-correction pattern of higher highs and higher lows remains intact, and black gold is like to return to scoring gains shortly.BitcoinSuch was the Bitcoin chart on Sunday when I tweeted about this go long opportunity. Since then, prices have risen to almost $59,000 as we speak. The uptrend is reasserting itself, but might take a while longer before the Bollinger Bands‘ upper border is reached.SummaryThe S&P 500 is probably almost done meeting headwinds, and the risk-on trades are likely to return before too long – the top of this bull market is still far away.Gold and miners need to prove themselves – especially the miners. With gold holding $1,760 and miners rebounding, the benefit of the doubt given to the precious metals upswing, would be justified – this precious metals upleg is quite well established already.
Will Biden Build Back Better… Gold?

Will Biden Build Back Better… Gold?

Finance Press Release Finance Press Release 04.05.2021 13:22
New spending is coming! And because of that, Biden’s speech to Congress was fundamentally positive for gold.Last week was full of big events. The FOMC released its newest statement on monetary policy meeting, while Powell held the press conference. On the same day, President Joe Biden made his first speech to Congress . Let’s take a look at his words.First of all, Biden laid out his American Jobs Plan , which proposes more than $2 trillion to upgrade US infrastructure and create millions of jobs. No matter that infrastructure spending has no stimulus effect, according to economic research .Second, if you think that $2 trillion is a lot of money, given America’s huge indebtedness, you are clearly wrong. Two trillion is practically nothing and definitely not enough, so Biden proposed another $1.8 trillion American Family Plan in investments and tax credits to provide lower-income and middle-class families with inexpensive childcare.Third, Biden understands that all these expenditures cannot be funded solely by increasing already huge fiscal deficits (see the chart below) and issuing new bonds.So, he proposed a hike in tax rates:It’s time for corporate America and the wealthiest 1% of Americans to pay their fair share. Just pay their fair share (…) We take the top tax bracket for the wealthiest 1% of Americans –those making $400,000 or more – back up to 39.6%.No matter that corporate taxes are implicit taxes on labor and that the current proposals for tax hikes are unlikely to fund the White House’s ambitious plans.Biden also proposed several reforms of the labor market: a 12-week paternal leave for families and an increase of the minimum wage to $15 an hour.So, in short, his speech called for several bold economic policies aiming to increase government spending and strengthen the American welfare state. Sounds good… for gold.Implications for GoldWhat does the Biden speech, and more generally his economic agenda, imply for the precious metals market? Well, it seems that the President cares not only about the workers, but also about the gold bulls. His plan is fundamentally positive for the yellow metal . After all, Biden wants to further increase government spending, which will weaken the long-term pace of economic growth and add to the mammoth pile of the public debt .There are also hints that this massive government spending flowing directly to the citizens could ignite inflation . After all, the US economy has already recovered from the pandemic recession , at least in the GDP terms, as the chart below shows. So, Biden’s economic agenda risks that the economy will overheat igniting inflation.He also adopted a more confrontational stance toward China, which could elevate the geopolitical worries and increase the demand for safe-haven assets such as gold .Another potential benefit is the proposal to raise corporate taxes, which is clearly negative for the US stock market and the greenback . Hence, gold could gain at their expense, especially if we see a pullback in the equity market…Last but not least, the increase in the minimum wage, and other labor market reforms, will not help in a quick employment recovery, so the Fed will maintain its dovish policy for longer. Indeed, we should look at Biden’s message together with the Fed’s signals. Biden proposed trillions of dollars in new spending, while Powell reiterated no hurry to raise interest rates . What a policy mix! We have both easy monetary policy and loose fiscal policy , a golden policy mix , indeed.Gold didn’t react strongly to these events, which is a bit disturbing, but this can be explained by the gains on Wall Street, as investors felt reassured that a financial bonanza would last undisturbed. So, the economic confidence remains high, but if it wanes, especially if inflationary threats come to the surface, gold may perform better.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Should you buy Microsoft and Google before earnings? - 04.05.2021

Should you buy Microsoft and Google before earnings? - 04.05.2021

Kseniya Medik Kseniya Medik 04.05.2021 13:59
What will happen?Two stock giants – Microsoft and Google – will publish earnings reports for the first quarter of 2021 on Tuesday after the market closes. Microsoft will release their financial results after midnight on April 27 at 00:30 (formally April 28) MetaTrader time (GMT+3), while Google at the midnight. By the way, the stock market is open from 16:30 to 23:00 MT (GMT+3). What to expect?Google is expected to deliver $15.45 earnings per share, while Microsoft – $1.76.How to trade on earnings?Check the economic calendar at the time of release to compare the actual data with the estimate.If the earnings come out better than expected, the stock price will move up. In case of worse-than-forecasted earnings, the stock price will move down.Microsoft outlookMicrosoft hit an all-time high yesterday, breaking above $260.00. Therefore, the way up to the next round number of $270.00 is open. Since expectations are high, Microsoft is rallying up even ahead of the earnings report. Forecasts are bullish, thus the stock is likely to keep climbing up. However, the RSI indicator is just below the 70.00 level. Once it breaks above this level, the stock becomes overbought and the reverse down may occur. Thus, be aware of the support levels at the low of April 14 at $255 and the psychological mark of $250. If the stock price goes down, it is likely to stop ahead of these levels rather than break out them. Google outlookAnalysts forecast that Google is likely to beat market estimates as its main source of profit – the advertising segment – recovered. Let’s look at the chart. If earnings are encouraging, Google may rise to the next round number of $2400, but the RSI indicator went above 70.00, signaling the overbought conditions. Therefore, the rally up shouldn’t last long. Support levels are at the recent low of $2250 and the 50-day moving average of $2140. Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
SPX Correction Arriving or Not?

SPX Correction Arriving or Not?

Monica Kingsley Monica Kingsley 04.05.2021 16:26
One more day of upside rejection in S&P 500, in what is now quite a long stretch of prices going mostly sideways. As unsteady as VIX seems at the moment, it doesn‘t flash danger of spiking in this data-light week, and neither does the put/call ratio. As I wrote yesterday about the selling pressure, these tight range days accompanied by 30-ish point corrections is as good as it gets when the Fed still has its foot on the accelerate pedal. Yes, you can ignore the Kaplan trial baloon (have you checked when he gets to vote on the FOMC?) that spiked the dollar on Friday but didn‘t put all that a solid floor before long-dated Treasuries as seen in their intraday reversal. Highlighting the key Treasury, inflation and reflation thoughts of yesterday, as these are still here to power stocks higher:(…) the 10-year yield has been quite well behaved lately, closing at 1.65% only on Friday. The April calm seems to be over, and I‘m looking for the instrument to trade at 1.80% at least at the onset of summer. Then, let‘s see how the September price increases telegraphed by Procter & Gamble influence the offtake – will the price leader be followed by its competitors? That‘s one of the key pieces of the inflation stickiness puzzle – and I think others will follow, and P&G sales and profitability won‘t suffer. The company is on par with Coca Cola when it comes to dividends really.Once there, we would progress further in the reflation cycle when inflation is no longer benign and anchored. We‘re though still quite a way from when the Fed tries to sell rising rates as proof of strengthening economic recovery – once the bond market would get to doubt this story though, it would be game over for its recent tame behavior.Gold market enjoyed its fireworks, aided mightily by the silver squeeze run. The inflation theme is getting rightfully increasing attention, and commodities are on the run across the board. Just check yesterday‘s oil analysis or the bullish copper calls of mine. I could just as easily say that copper is the new gold – it has been certainly acting as one over the past many months, yet the yellow metal‘s time in the limelight is about here now. And don‘t forget about silver bring you the best of two worlds – the monetary and industrial applications ones.When it comes to USD/JPY support for the unfolding precious metals upswing, we indeed got the reversal of Friday‘s USD upside:(…) The taper story being revealed for a trial baloon that it is, would quickly reverse Friday‘s sharp USDX gains, where particularly the USDJPY segment is worth watching. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe declining volume tells a story of not enough conviction to go higher or lower – the market remains vulnerable to brief spikes either way such as those seen and covered in both today‘s intraday Stock Trading Signals.Credit MarketsAs inconclusive intraday the corporate credit markets may seem, the pressure to go up is there, regardless of the high yield corporate bonds reversal. Long-dated Treasuries aren‘t standing in the way but it must be noted that these have given up their intraday upswing completely, and opened with no bullish gap.Technology and FinancialsTechnology lost the advantage of higher open, and wasn‘t helped by the poor daily $NYFANG performance. At the same time, value stocks continued higher but gave away a portion of intraday gains. The markets are on edge, and a bigger move this or more likely next week, shouldn‘t come as a surprise.Smallcaps and Emerging MarketsThe Russell 2000 turned higher on Monday, and emerging markets seem waiting for more signs of dollar weakness. Overall, the U.S. indices still continue outperforming the international markets.Gold and Miners Short-TermVolume returned into the gold market, and so did miners‘ outperformance. While these didn‘t close anywhere near their mid-Apr highs unlike gold, they had extremely undeperformed on Friday – what happens over the next few sessions would provide clue as to whether strength genuinely returned yesterday.Gold and Miners Long-TermThe copper to 10-year Treasury yield is edging higher again, and the miners to gold ratio strongly rebounded, proving my yesterday‘s point that the real parallels are the 2018 and 2019 gyrations, not the uniquely deflationary corona crash.SummaryThe S&P 500 remains vulnerable to short-term spikes in both directions, but the medium-term picture remains positive – the strong gains since late Mar are being worked off here before another upswingGold and miners proved themselves yesterday, and scored strong gains in a universally supportive array of signals across commodities, Treasuries, and also the USD/JPY daily move. Well worth not retiring the benefit of the doubt given to the precious metals bulls – more gains are in sight.
Forex majors: short-term and long-term

Forex majors: short-term and long-term

Kseniya Medik Kseniya Medik 05.05.2021 12:19
EUR/USD: a downswing loomingAt the beginning of the virus hit, EUR/USD was in the zone of 1.10. By the end of 2020, it rose to 1.2350. Since then, it’s been going mostly downwards as the USD is gaining momentum with the recovering US economy. Currently, it trades around 1.20, and if the US economic optimism stays for another month or two, we are likely to see the pair challenge the tactical supports of 1.17 and 1.16.GBP/USD: post-BrexitFrom the depths of 1.20 at the beginning of the pandemic, this pair has been going upwards almost in a straight line to reach 1.42 in February. Since then, it dropped some of the gains and has been floating below 1.40. Pound’s offensive may have stopped due to the accumulating effect of Brexit as the UK is seeing a lower financial dynamic than before. Locally, 1.38 and 1.38 are the supports bears may be aiming at. If these get broken in the coming weeks, it may be a start of a whole new multimonth downswing back to 1.20.EUR/GBP: bouncing upwards or five-year lowsWhile this pair dropped to 0.83 in the first part of 2020, it has been trading around 0.90 in the second part. However, it ceded most of the gains during previous months going down to 0.85 in April. That level turned out to be a tactical low that sent the currency pair into the upside. EUR/USD bounced off that level a month ago to reach 0.87 – this is the current resistance level. Currently, the pair is on the way downwards after bouncing off it a few days ago. If bears keep pulling, it may reach 0.86 and aim at 0.85 once again. In the larger perspective, the behavior of EUR/GBP in the coming weeks will indicate if it is going to re-take the gains made through 2020 or go further downwards to the five-year lows of 0.83.Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
Lumber and Copper Are Surging. Will Gold Join the Party?

Lumber and Copper Are Surging. Will Gold Join the Party?

Finance Press Release Finance Press Release 06.05.2021 15:47
There’s no inflation … None at all. Only, completely by accident, lumber prices are skyrocketing. Gold is likely to remain silent, but it may catch up later.The rise in lumber prices can be seen in the chart below:What a surge! It happened because of the limited supply and strong demand for new houses. But it’s not just lumber. Many raw commodities are rallying too. The price of copper, for example, has just approached its record height (from February 2011), as the recovery of the global economy boosted demand. Just take a look at the price below.Indeed, the trend is up. Commodity prices are on the rise as a whole as the chart below clearly shows. Even Warren Buffet warned investors against a “red hot” recovery, saying that his portfolio companies were “seeing very substantial inflation” amid shortages of raw materials.Of course, commodity price inflation and consumer price inflation are quite different phenomena, as consumers don’t buy lumber or copper directly but only finished products made from these materials. However, at least part of this producer price inflation may translate into higher consumer prices, as producers’ ability to pass higher costs on consumers has recently increased – people have a large holding of cash and are willing to spend it.Implications for GoldWhat do rallying commodity prices imply for the precious metals? Well, rising commodity prices signal higher inflation, which should increase the demand for gold as an inflation hedge . Of course, there might be some supply disruptions and bottlenecks in a few commodities. However, the widespread character and the extent of the increase in prices suggest that monetary policy is to blame here and that inflation won’t be just transitory as the Fed claims.What’s more, the commodity boom is usually a good time for precious metals . As the chart below shows, there is a strong positive correlation between the broad commodity index and the precious metals index.There was a big divergence during the pandemic when commodities plunged, while gold at the same time shined brightly as a safe-haven asset . So, the current lackluster performance of the yellow metal is perfectly understandable during the economic recovery.Indeed, the rebound in gold has been weak, and gold hasn’t even crossed $1,800 yet, although it was close this week, as the chart below shows.There was a rally on Monday (May 3) amid a retreat in the US dollar, but we were back in the doldrums on Tuesday, amid Yellen’s remarks about higher bond yields . She said that interest rates could rise to prevent the economy from overheating:It may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat, even though the additional spending is relatively small relative to the size of the economyHowever, Yellen clarified her statements later, explaining that she was not recommending or predicting that the Fed should hike interest rates. Additionally, several FOMC members made their speeches, presenting the dovish view on the Fed’s monetary policy . For example, Richard Clarida, Fed Vice Chair, said that the economy was still a long way from the Fed’s goals and that the US central bank wasn’t thinking about reducing its quantitative easing program .Anyway, the price of gold has been trading sideways recently as it couldn’t break out of the $1,700-$1,800 price range. This inability can be frustrating, but the inflationary pressure could help the yellow metal to free itself from the shackles. The bull market in gold started in 2019, well ahead of the commodities. Now, there is a correction , but gold may join the party later . It’s important to remember that reflation has two phases: the growth phase when raw materials outperform gold and the inflation phase when gold catches up with the commodities. So, we may have to wait for a breakout a little longer, but once we get it, new investors may flow into the market, strengthening the upward move.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Gold & the USDX: Correlations

Trade ideas for the week of May 10-14

Kseniya Medik Kseniya Medik 07.05.2021 10:03
The week will be full of US data: inflation, jobless claims, retail sales, and some other reports. They will have a huge impact on the currency pairs with the US dollar and also gold. Inflation is the main topic of traders’ talks these days as it is getting closer to the levels unseen in 14 years, but the Fed tries to assure investors that inflation will stay at these heights just for a short period. However, market participants do not fully trust these words and watch closely for Fed’s actions, when it will start tapering: cut asset purchases or hint about raising interest rates. When it happens, it will send the US dollar soaring.EUR/USDThe economic situation is getting better in the Euro Area. Increasing vaccinations and plans to ease travel restrictions can push EUR/USD higher to April highs of 1.2150. Besides, any progress on the EU Recovery Fund should positively impact the euro as well this quarter. USD/CADThe Bank of Canada was the first bank to tighten the policy after the pandemic crisis. The Canadian dollar gained on that hawkish move. Thus, USD/CAD is going down and down. Besides, the CAD was supported by rising oil prices as Canada is one of the world’s largest exporters. Sooner or later the pair may hit the psychological level of 1.2000.DisneyThe earnings season is coming to an end! Walt Disney is one of the latest to deliver it earnings results. They will be out on May 13 at 23:30 FBS Trader time (GMT+3). The forecast is $0.27 per share. If the actual data beats the market estimate, Disney will surge. Otherwise – drop. Besides, Disney is trading at the local lows at the moment of writing, thus if earnings are strong, it will push the stock up with a greater force.XBR/USDXBR/USD is the UK Brent crude oil. It has been moving gradually up these days, driven by the easing of travel restrictions and the global economic recovery. Some analysts are even talking about oil hitting $80.00 a barrel, but it should break the $70.00 resistance at first and rising cases in India may cap gains.Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
Transportation Index Continues To Grind Higher

Transportation Index Continues To Grind Higher

Chris Vermeulen Chris Vermeulen 07.05.2021 14:25
If the face of last week's sideways price action and almost in a rebellious manner today (May 4, 2021), the Transportation Index is moving higher while the US major indexes are all broadly lower.  VIX has shot up over 20 again (over +13% higher) and the NASDAQ is off by more than 300 points (-2.75%) as I write this article.  Yet, the Transportation Index is bucking the trends and trading higher.WHAT DOES IT MEAN WHEN THE TRANSPORTATION INDEX BUCKS THE MAJOR INDEX TRENDS?My team and I have often highlighted the Transportation Index in our past research article. The reason we watch this index so closely is that it tends to lead market trends by at least 30 to 60 days.  In short, the Transportation Index is a measure of future expectations related to freight, shipping, transportation, and the movement of goods and commodities across the US and across the globe.  When an economy contracts, the Transportation Index will likely follow major indexes lower as future expectations related to economic activity contract.  When a recession or deep price correction happens, the Transportation Index usually moves sharply lower as the sudden shock of an unexpected economic contagion vastly alters future economic expectations.  But generally, the Transportation Index tends to front-run economic expectations.The fact that the US major indexes are all broadly lower while the Transportation Index is moderately higher (and really running counter to the bearish trending) today suggests this price decline is a technical pullback in price – not a broad market contagion event.  As we interpret this early stage price rotation, we have to call it as we see it right now - Crude Oil is higher, the Transportation Index is higher, and the US Dollar rebounded higher yesterday.  Until we see confirmation within all three of these components related to a change in price trend, we believe the current move is a technical pullback of the bullish price trend, meaning the markets just got ahead of themselves recently and this is a common pullback.We are fairly early into this pullback and things may change if it progresses downward over the next few days/weeks.  But right now the strength in the Transportation Index, the US Dollar, and Crude Oil are suggesting the markets are expecting a continued reflation trade (upward trending) to continue at some point in the near future.  If the Transportation Index were to fall below $14,800 on a deep price decline, then we would immediately become very concerned that a broad market bearish price trend has set up, possibly setting off a very deep price correction.As I highlighted in yesterday's research article, precious metals will likely continue to rally in a moderate upside price trend because both Gold and Silver have recently started a new Advancing Cycle Phase. This start of a new Cycle Phase may be prompting some early rotation in the US major indexes right now and we'll just have to watch and see how this proposed technical pullback plays out over the next few days/weeks.Watch previous Pivot Low levels for support in the markets.  We are seeing some increased volatility and when markets break previous “stand-out” pivot lows, that's when we want to prepare for the potential of a deeper downside price trend. The basis of Fibonacci Price Theory is that price is always seeking new highs and new lows – thus, the breach of a major “stand-out” pivot low could be interpreted as a major breakdown in price trending.The bigger question is, will you be ready to jump into the strongest sectors when this downside trending ends?  Do you know which sectors present the best opportunities for future profits?  You can learn more about how I identify and trade Gold, Silver, and the markets by watching my FREE step-by-step guide to finding and trading the best sectors. Don't miss the opportunities in the broad market sectors over the next 6+ months.  Staying ahead of these sector trends is going to be key to developing continued success in these markets. My BAN Trader Pro newsletter service does all the work for you with daily pre-market reports, proprietary research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers. Sign up today!
Inflation Knock-knock-knockin’ On Golden Door

Inflation Knock-knock-knockin’ On Golden Door

Finance Press Release Finance Press Release 07.05.2021 16:43
Inflation is not coming. It is already here! Gold should benefit, given that it could be higher and more lasting than the pundits believe.“Knock, knock, knockin’ on heaven’s door”, so sing Bob Dylan and Guns N’ Roses. Now, inflation is knocking on the golden door. According to the BLS , the U.S. CPI inflation rate recorded a monthly jump of 0.6% in March, while soaring 2.6% on an annual basis. And the core inflation has also accelerated. So, inflation has significantly surpassed the Fed’s target of 2% , as one can see in the chart below.And remember that this is what the official data shows, which rather underestimates the true inflation. This is because of several issues, including hedonic quality adjustments, shifts in the composition of the consumer baskets and methodological changes. It is enough to say that the rate of inflation calculated by the John Williams’ Shadow Government Statistics that uses methodology from the 1980s is over 10% right now.There are some controversies about this alternate data, but I would like to focus on something else. The CPI doesn’t include houses (or other assets) into the consumer baskets, as they are treated as investments. The index only takes rents into account. But homeowners don’t pay rents, so for them, the cost of shelter, which accounts for about one-fourth of the overall CPI, is the implicit rent that owner-occupants would have to pay if they were renting their homes. And this component rose just 2 percent in March, while the Case-Shiller Home Price Index, which measures the actual house prices, soared more than 11% in January (the latest available data). According to Wolf Street , if we had replaced the owners’ equivalent rent of primary residence with the Case-Shiller Index, the CPI would have jumped 5.1 instead of 2.6%. The chart below shows the difference between these two measures.Hence, inflation has come, and even the official data – which can underestimate the level of inflation that ordinary people deal with in their daily lives – confirms this. If you’ve been buying food lately, you know what I mean. Now, the question is whether this inflation will be temporary or more lasting.Powell , his colleagues and the pundits claim that higher inflation will only be a temporary phenomenon caused by the base effect. The story goes like this: the CPI plunged in March 2020, which created a lower base for today’s annual inflation rate. There is, of course, a grain of truth here. But let’s take a look at the chart below. It shows the CPI, with both March 2020 (red line) and February 2020 (green line) as a base. As you can see, in the latter case the index jumped 2.3%. Yes, lower, but not significantly lower than 2.6% when compared to March 2020. So, the Fed shouldn’t blame the base effects for accelerating inflation (and funny thing: have you heard the pundits talking about the base effect when they were talking about vigorous GDP recovery?).Instead, central bankers should blame themselves and their insane monetary policy . After all, as the chart below shows, the Fed’s balance sheet has soared $3.4 trillion (or 81%), while the broad money supply (measured by M2) has increased more than $4 trillion (or 26%) from February to date.They could also blame reckless fiscal policy . Growing government spending, enabled by a rising pile of debts monetized indirectly by the Fed, has headed for Main Street. This, combined with a jump in the broad money supply, is the key change compared to the Great Recession when almost all stimuli flowed into Wall Street and big corporations. Sure, some people use the received money to increase savings and repay debts. But with the reopening economy, some of the pent-up demand will be realized. Actually, many Americans have already started spending free time traveling like crazy after being locked in homes for so long.And this is very important: consumers are therefore more eager to accept higher prices. It shouldn’t be surprising given all the checks they got and how hungry for normal life they are. As I reported last month , companies are reporting rising prices of commodities and inputs (partially because of the supply disruptions too), but so far their power to pass the producer price inflation to consumers has been limited. However, this is changing . The April report IHS Markit U.S. Services PMI observes thatRates of input cost and output charge inflation reached fresh record peaks, as firms sought to pass on steep rises in input prices to clients (…) A number of companies also stated that stronger client demand allowed a greater proportion of the hike in costs to be passed through. The resulting rate of charge inflation was the quickest on record.All these reasons suggest that higher inflation could be more lasting than most of the so-called experts believe (although the officially reported inflation doesn’t have to show it). This is good news for the yellow metal . Higher inflation implies lower real interest rates and stronger demand for gold as an inflation hedge . What is important here is that we have more inflationary pressure in the pipeline exactly at the time when the Fed has become more tolerant of inflation. So, the combination of higher inflation with a passive central bank position sounds bullish for gold . The key issue here is whether the markets believe that the Fed will allow for higher inflation. So far, they have been skeptical, so the expectations of interest rates hikes accumulated and the bond yields rallied. But it seems that the Fed has managed to convince the markets that it’s even more incompetent than it is widely believed. If the distrust in the Fed strengthens, gold should return to its upward trajectory from the last year.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
What‘s Not To Love About These Great Bull Runs?

What‘s Not To Love About These Great Bull Runs?

Monica Kingsley Monica Kingsley 10.05.2021 14:39
A bit of selling at the open, and off to new highs – the S&P 500 bulls are taking no prisoners. The long recent consolidation has been broken, and it was again to the upside. Option traders are still having a hard time agreeing with the declining VIX, which is pointing to them serving as still some more cannon fodder next in the bullish advance. In fairness though, it can‘t be denied that the average put/call ratio has been rising over the last 3 months.Still, that doesn‘t change the reality that my reasonably and justifiably aggressive long positions in both S&P 500 and gold, are going even more profitable. No problem that the Russell 2000 didn‘t climb as much – emerging markets stepped into the void on account of predictably cratering USD. Friday didn‘t bring any changes to the narratives – the very weak non-farm payrolls weren‘t a selling catalyst in the least. All eyes remain on reopening trades to the effect that value stocks are rising effortlessly whatever the nominal rates direction. In spite of inflation and inflation expectations not being negligible, we‘re in still in the reflationary period where economic growth is higher than either of these two.Not only is the S&P 500 advance a very broad one as evidenced by the number of stocks trading above their 50-day moving average (with tech playing a positive role once again), commodities continue being on fire. Especially the base metals such as copper welcomed the uptick in inflation expectations. With the recent two trial baloons (Kaplan and Yellen), the Fed might be exploring market reactions if it had moved to counter inflation at least to some degree. Hold not your breath though, that would tank the risk-on assets – they won‘t do that any time soon.Gold is making its run, unhampered by nominal yields rising on the day. Miners have continued their advance, and the precious metals upleg offers a sight of health. Note also that the silver miners have been doing overall better than the gold ones throughout the long soft patch starting in Aug 2020, just as silver did. That‘s precisely what to expect in an environment of inflation running hot:(…) Gold and silver fireworks arrived, and more is to come! What a better proof than a broad based advance across the sector, starting with both metals, and extending to gold and silver miners left and right. Not to mention the copper fires burning brightly – if you were listening to my incessant red metal bullish calls, you‘re very happy now. And just as in the precious metals, there is more to come here too.And as the Fed continues playing ostrich when it comes action, commodities including oil continue doing great. While black gold consolidated over the last few sessions, it remains primed to go higher.Bitcoin is also enjoying upside momentum as it aims to clear the 50-day moving average vicinity. Its uptrend is gradually reasserting itself – patience required still. But it‘s the steep gains in other cryptos such as Ethereum making new highs practically on a daily basis, that is catching much attention. ETH/USD looks short-term extended though, and I would prefer waiting for a pullback, especially given the last two candles‘ shape (both having significant knots – today is shaping up to be a day of more upside rejection).Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookWe‘re again at the upper border of the Bollinger Bands, and the daily indicators are constructive with more room to grow. We‘re staring at a positive week ahead.Credit MarketsThe corporate credit markets did waver a little on the day, investment grade bonds more so than the high yield ones, which is understandable given the long-dated Treasuries setback.Technology and ValueTechnology rebound continues, and should so aided by the recent earnings announced. I am not looking for a meaningful dip in $NDX or whichever part of the tech sector over the nearest days as $NYFANG did its job quite well on Friday. Yet again, value stocks continued their steep ascent come hell or high water.Inflation ExpectationsA rare sight indeed – Treasury yields have run behind inflation expectations on Friday.Gold, Silver and MinersGold and miners continue running higher together, and neither gold‘s upper knot nor miners reaching visually escape velocity compared to the yellow metal, is an issue, because copper had a great day.Silver consolidated daily gains, lagging behind both gold and copper. No issues, the white metal has great days ahead still, and Friday‘s session proves that the precious metals upswing is nowhere near overheated.Crude OilCrude oil bulls defended Thursday‘s lows, and the bullish consolidation continues. Look for an upside breakout next as this isn‘t a double top. I‘m standing by my calls for at least $80 West Texas Intermediate before 2022 is over. Seasonality is still good for black gold, so enjoy the ride!SummaryS&P 500 is at new highs, and its ascent is far from over – no signs of a major or even local top to be made. The index will have an easier time now that the short term tech / Nasdaq outlook has flipped bullish as well. Gold, silver and miners continue to be well positioned to reap further gains as the well balanced rally continues. The copper and nominal yields combo balances each other out, so the factors speak for a bullish consolidation in the short term as a minimum.Crude oil is getting ready to resume its upswing in a modest fashion, and I look for its early Mar top to be challenged this or next week.Bitcoin upswing is very gradually reasserting itself, and the bulls would be well advised to pay attention as the 50-day moving average is likely to start sloping upwards perhaps as early as this Friday, thus supporting the prices above the late Apr base.Thank you for having read today‘s free analysis, which is available in full here at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.Thank you,Monica KingsleyStock Trading SignalsGold Trading SignalsOil Trading SignalsBitcoin Trading Signalswww.monicakingsley.comk@monicakingsley.co* * * * *All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.
Gold Jumps above $1,800. What’s Next?

Gold Jumps above $1,800. What’s Next?

Finance Press Release Finance Press Release 11.05.2021 16:54
Gold jumped above $1,800, and it’s the disappointing jobs data that added fuel to the fire.The gold market is a funny place. On Thursday (May 6), I complained that the yellow metal couldn’t surpass $1,800:The price of gold has been trading sideways recently as it couldn’t break out of the $1,700-$1,800 price range. This inability can be frustrating, but the inflationary pressure could help the yellow metal to free itself from the shackles.And voilà, just later that day, the price of gold finally jumped above $1,800, as the chart below shows. Hey, maybe I have to complain about gold more often?But jokes aside. The move is a big deal, as gold has finally broken above the key resistance level. What’s important here is that the breakthrough wasn’t caused by some negative geopolitical or economic shock, but rather by fundamental and sentiment factors.So, what happened? First, there is a weakness in the US dollar . With global economic recovery progressing, the safe-haven appeal of the greenback is simply vanishing. Another issue here is – and I pointed this out in the Fundamental Gold Report dedicated to the latest ECB’s meeting – that the pandemic in the Eurozone has reached its peak. So, the worst is already behind the euro area, and it can catch up with the US now, supporting the euro and gold against the dollar.Second, the bond yields have been heading lower recently . As one can see in the chart below, the real interest rates have corrected significantly since their peak in March. In early May, the 10-year TIPS yields slid further, returning to almost -0.90 percent.What is noteworthy here, the real interest rates declined more than the nominal interest rates. It resulted from the increase in the expected inflation. Indeed, as the chart below shows, the 10-year breakeven inflation rate jumped in early May . As a reminder, I wrote on Thursday that “the inflationary pressure could help the yellow metal to free itself from the shackles” and this is exactly what happened.Implications for GoldWhat does gold’s jump above $1,800 imply for its future? Well, the crossing of an important obstacle is always a positive development. The decline in the interest rates, coupled with the weakness in the US dollar, means that the markets are convinced that the Fed would remain very dovish, even despite the rising inflation .Other positive news for the gold market is April’s nonfarm payrolls that came in below the forecasts. The US economy added only 266,000 jobs last month (see the chart below), although many analysts and even the FOMC members expected a nearly 1 million increase in employment. Such a disappointment made traders slash the bets on the pace of the Fed’s monetary tightening. A softer expected path of the federal funds rate is a fundamentally positive factor for gold.In other words, the weak employment report relieves a lot of the pressure put on the Fed to tighten its monetary policy. So, the US central bank will continue to provide monetary support, despite all the progress observed in the economy, and that easy stance will stay with us for longer than previously expected. In that sense, April’s disappointing jobs data may be a game-changer for gold, and it could add fuel to the recent rally that started on Thursday.Of course, one weak employment number doesn’t erase the impressive economic recovery. Moreover, I would like to see that gold hold the recent gains through the coming days before organizing a party for the gold bulls. However, it seems that I was right in saying that the second quarter would be much better than the first one. Gold is indeed gaining momentum! And, what’s really important, the yellow metal started to rise amid a strong economic recovery – it implies that we can be observing important, bullish shifts in the market sentiment towards gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Where's The Beef?  Is The US Fed Behind The Inflation Curve?

Where's The Beef? Is The US Fed Behind The Inflation Curve?

Chris Vermeulen Chris Vermeulen 12.05.2021 17:24
We recently completed some interesting research related to one of our newest Custom Indexes – the Commodities to Smart Cash Index (C2SC Heat Index) - weighted by the US Dollar and VIX.  We've been reviewing this new index for months watching it to see how it reacts to various trends in Lumber, Gold, Treasury Yields, the Smart Cash Index, and other weighted values.  Recently, we added the Fed Funds Rate to this chart and suddenly things took on a different perspective.We had drawn horizontal lines on the Commodities to Smart Cash index highlighting historical high, low, and confluence price levels.  Historically, when we see a chart that channels in a sideways range, one can often identify high and low price thresholds while also trying to find a confluence level (where a continued rise or decline in price is likely to continue). We can see how the US Fed reacted to rising inflationary concerns almost immediately as the C2SC Index rose near or above 6.5 (the RED Confluence level) throughout the past 25 years.  Each time, in 1994, 1999, and 2005, when a period of increasing inflationary trends, the Fed was quick to act to contain inflation.  The only time the Fed acted differently was in 2013~2015 and in 2020~now.Where's The Fed?  Watch Precious Metals For Signs Of PanicIn 2013~2015, the C2SC Index rose above the Confluence level (the RED line) multiple times, yet the Fed kept rates extremely low – ignoring inflationary risks at that time.  Then, in 2016, the Fed raised rates very slightly in an effort to test the global market's reaction to tightening financial policy ahead of a big US election event.  By mid-2017, the C2SC index started rising and the US Fed continued to raise interest rates.  By late 2017, the C2SC index had risen past the RED Confluence level again and the US Fed continued to raise rates well into early Summer 2018. In August 2018, the Fed attempted another 0.25% raise that broke the market trend and prompted a broad market decline into December 2018.  In reaction to this breakdown in US markets, the US Fed dropped the Fed Funds Rate from 2.5% to 1.5% in a panic move.  It stayed at that level until COVID-19 hit in February/March 2020.Looking at the C2SC index, commodities have rallied more than 300% above the past 25 years of historic highs recently while Yields and Gold/Silver continue to stay rather muted in trends.  Our concern is that the US Fed, in an effort to spark a solid post-COVID-19 economic recovery, has ignored the risks related to the extreme excess phase rally taking place throughout the globe in commodities, Cryptos, non-tangible speculative assets (NFTs, digital and others) as well as the risks associated with an eventual raising of interest rates to curb this inflationary excess phase.  Gold and Silver have just started what appears to be a new bullish price trend.  Will the US Fed be pushed to raise rates soon to curb this incredible bubble rally?We started bouncing around the idea that the US Fed was inadvertently prompting a South Seas Company type of bubble event by allowing gross amounts of capital into the markets and artificially keeping interest rates near zero.  For those of you who don't know the story of the South Seas  Company in London (1720), you can read more about it here: https://www.britannica.com/event/South-Sea-BubbleFOMO Hyper-inflation Continues (until it ends)In short, The South Seas Company was awarded £7 million to finance the war against France by the House of Lords.  This bill, known as the South Sea Bill, allowed the South Sea Company a monopoly on the trade to South America (mostly Slave trade) and was expected to be a boost to the companies bottom line as the war with France ended with the Treaty of Utrecht (1713).  Over the next 5+ years, the South Seas Company enjoyed robust profits and trade. Shares of the South Sea Company rose to 10x their value.  Then, the South Seas Company, with King George I of Great Britain as governor of the company in 1781, suggested taking over the national debt of Great Britain in 1720. Sign up for my free trading newsletter so you don’t miss the next opportunity!The South Seas Company accomplished this incredible feat and shares started to skyrocket higher from $128.5 to over $1000 in just 7 months.  As the hype continued to drive speculation and rumors, other stocks (some newly formed companies) were quick to catch the hype and quickly rallied to extreme highs as false statements, word-of-mouth hype and a general hyperbolic frenzy continued to drive speculation.What brought down the South Seas Company was unbridled rumors, outright lies, hyperbolic speculation, and, eventually, a flood of money from France's modernized economy.  When the trend finally broke down, it took about 12 months for the entire bubble to deflate – leaving speculative investors holding empty bags.The rally of the South Seas Company is very similar to what we are seeing right now in the US economy and in digital assets.  There were a number of facets in place to drive this type of hyperbolic rally.  First, the South Seas Company took over the national debt – essentially acting like the US Federal Reserve for Great Britian.  Secondly, the wild speculation related to ongoing business activities and future expectations prompted an over-enthusiastic buying frenzy – driving prices higher by 10x traditional valuation levels.In the end, with all the speculation, hype and people of title involved, the expected profits and returns from the South Seas Company never really materialized.  The stock price started to decline and finally broke downward very sharply near late 1720 – almost 3 months after it peaked.Is The US Fed Preparing To Make A Move Soon?The recent rally in the US stock markets has seemed to stall recently, as can be seen in this Smart Cash Index chart below.  Still, the recent rally since the November 2020 elections is nothing short of amazing – very similar to the rally in 2017 and into early 2018 – almost straight up.Our research team believes a continued market rally may keep attempting to “melt-up” as long as the US Fed does not step in to try to curb inflationary aspects of the markets.  It is hard to argue that traders and investors are going to suddenly change their minds in the midst of this FOMO rally - although, it does happen at some point.There are really two concerns related to how this may end: the US Fed suddenly acting to curb inflation by raising rates and/or the consumers suddenly realizing the valuation levels have exceeded realistic expectations.  We feel the rise in commodity prices as well as the current uptrend in precious metals and Copper may be pushing consumers closer and closer to that sudden realization that valuations are grossly advanced in comparison to real expectations.When you look at this Smart Cash Index Monthly chart, below, you see that the Fed Funds Rate is still anchored near ZERO while the Smart Cash Index is nearing the highest levels since the January 2018 Ultimate Peak.  The primary difference is that the US Federal Reserve is not acting to raise rates like they were in 2018 or even just before the Housing Bubble (2005~06).  This suggests the rally may continue in a hyper-inflation trend and may push well beyond anyone's expectations in the near future. Remember, our C2SC Heat Index is showing the current rally is nearly 300%+ above normal upper ranges.  How far will it go?  We really don't know how far this could continue to rally or where the ultimate peak is going to set up.  All we can suggest at this point in time is that we've entered uncharted waters and we don't have many historical reference points to use for our analysis. All we can do is ride this trend out using our advanced price modeling systems and watch for signs of a breakdown in support and correlative assets (like Precious Metals, Bonds, Utilities, and the Fed Funds Rate). If the Fed suddenly starts making moves to address pending inflation, then we may see some big volatility hit the markets.  We feel the Fed will slowly move to address inflationary concerns over the next 12+ months – not move in a sudden, aggressive manner. We need to watch how commodities continue to rally and how consumers react to these inflationary price concerns.  If global consumers suddenly shift away from spending as prices continue to rally, then we may start to see a dynamic shift in how the economy continues to expand/recover.  Consumers become very protecting of capital/resources when an economy shifts from expansion to contraction.Either way, there are going to be some really big trends in 2021 and 2022 for traders/investors.  This is the type of setup that can make fortunes for skilled traders/investors.  The bigger question is, will you be ready to jump into the strongest sectors when this downside trending ends?  Do you know which sectors present the best opportunities for future profits?  You can learn more about how I identify and trade the markets by watching my FREE step-by-step guide to finding and trading the best sectors. Don’t miss the opportunities in the broad market sectors over the next 6+ months.  Staying ahead of these sector trends is going to be key to developing continued success in these markets. My BAN Trader Pro newsletter service does all the work for you with daily pre-market reports, proprietary research, and trade alerts. More frequent or experienced traders have been killing it trading options, ETFs, and stocks using my BAN Hotlist ranking the hottest ETFs, which is updated daily for my premium subscribers. Sign up today!Have a great week!
When Euphoria Ends, Gold Bulls Enter the Scene

When Euphoria Ends, Gold Bulls Enter the Scene

Finance Press Release Finance Press Release 14.05.2021 16:11
Market participants are very optimistic about an economic recovery, but these positive expectations may be exaggerated. The end of this euphoria should be good for gold.The optimism about the pace of economic recovery from the 2020 recession is growing. The analysts race in upward revisions of GDP growth in the coming quarters. For example, the IMF – in the April 2021 edition of the World Economic Outlook – expects at the moment that the US economic output will increase by 6.4% this year, compared to the 5.1% growth forecasted in January.The euphoric mood has some justification, of course. The vaccination is progressing, entrepreneurs are used to operating under sanitary restrictions, economies are reopening and governments are spending like crazy. At the same time, central banks are maintaining ultra-easy monetary policy , keeping financial conditions loose.Furthermore, some economic data is consistent with strong rebounding, especially in manufacturing. For instance, the IHS Markit U.S. Manufacturing PMI Index posted 59.1 in March, up from 58.6 in February – being the second-highest value on record since May 2007 when data collection began. Services are also recovering vigorously, as the IHS Markit US Services PMI Index registered 60.4 in March, up from 59.8 in February. It’s the fastest rate of growth since July 2014.Now, the question is how strong the current boom is and how long it is going to last. Well, there is no need to argue that we will see a few strong quarters of GDP growth in the US and other countries. But for me, the euphoria is exaggerated. You see, the current recovery is not surprising at all. As the Great Lockdown plunged the world into a deep economic crisis , the Great Unlocking is boosting the global economy.And there is the base effect . There was a low base in 2020, so the seemingly impressive recovery in 2020 is partially merely a statistical phenomenon. Let’s illustrate this effect. In Q2 2020, the real GDP plunged from $19,020 to $17,302 trillion or 9.03%year-over-year, as the chart below shows.However, the rebound to the pre-recession level would imply the jump of 9.93%, almost one percentage higher! This is how the math works: when you divide a numerator by a smaller denominator, you get a greater percentage. So, it would be alarming if the recovery were not strong after one of the deepest crises in history.Another issue that makes me more skeptical than most pundits is the fact that the main reason behind economic growth upgrades is massive fiscal stimulus . Uncle Sam injected more than 13 percent of the GDP in government spending (only in 2020) that ballooned the fiscal deficits . Meanwhile, the Fed widened its balance sheet by almost $4 trillion. So, it would be quite strange if we didn’t see impressive numbers in light of such unprecedented inflows of monetary and fiscal liquidity. But it means that the impressive recovery in statistics is driven, at least partially, by soaring money supply and public debt (see the chart below).And my three last concerns. First, the job recovery is more sluggish than the GDP recovery . The unemployment rate is still above the pre-pandemic level, while the labor force participation stands significantly below the level seen in February 2020. Second, a full return to normal life will occur if vaccines remain effective. But there is a tail risk of new variants of the virus, which could even be vaccine-resistant . Third, history teaches us that when the pandemic ends, social unrest may reemerge. After all, the epidemic left us with deepening inequalities and rising living costs.What does it all mean for the gold market? Well, the market euphoria about the economic rebound is negative for gold. We have already seen how these optimistic expectations freed the risk appetite and boosted economic confidence, sending bond yields higher, but gold prices lower.However, just as the doomsday scenarios created in the midst of the epidemic were excessively negative, the current ones seem to be too optimistic. I expect that with the year progressing, these expectations will soften or shift to the medium-term, which could be more challenging. After all, the low base effect will disappear, and both the monetary and fiscal policies will have declining marginal utility. At the same time, there will be an increased risk of high inflation , debt crisis , stock market correction or even financial crisis . After all, the current levels of stock indices are partially caused not by fundamentals, but by the elevating risk tolerance thanks to the central banks standing behind most asset classes ready to intervene in case of problems.It seems that this process has already begun and the reopening trade is waning. Economic confidence is very high, so the room for further increases is limited. The low-hanging fruits have been collected, and when economies reopen fully, the structural problems will become more important than the cyclical ones. Investors have started to worry about higher inflation, especially because the Fed remains unmoved by rising prices. A jobless recovery would prolong the Fed’s very dovish stance , as the US central bank focuses now on full employment rather than on stable prices. All these factors explain why the price of gold has been rebounding recently, and why it can rise even further later this year , although the fact that the US enjoys a stronger recovery than the EU or Japan could support the interest rates and the greenback , creating some downward pressure on the yellow metal.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Gold & the USDX: Correlations

Being a Gold Bull Is Now Far Too Easy - Don’t Be Deceived

Finance Press Release Finance Press Release 17.05.2021 15:18
Easy choices lead to a hard life (or at least losses), and because gold’s downside move is delayed, it’s extremely easy to be bullish on gold right now.It’s easy to get carried away by the day-to-day price action, and it’s even easier to feel the emotions that other market participants are feeling while looking at the same short-term price action. Right now, it’s tempting to be bullish on gold. It’s “easy” to be bullish on gold while looking at what happened in the last 1.5 months. But what’s easy is rarely profitable in the long run.“Easy choices – hard life. Hard choices – easy life” – Jerzy GregorekLet’s get beyond the day-to-day price swings. The Fed has been keeping the interest rates at ultra-low levels for many months, and it has just pledged to keep them low for a long time. The world is enduring the pandemic, and the amount of money that entered the system is truly astonishing. The savings available to investors skyrocketed. The USD Index has been beaten down from over 100 to about 90. And yet, gold is not at new highs. In fact, despite the 2020 attempt to rally above its 2011 high, gold’s price collapsed, and it invalidated the breakout above these all-important highs. It’s now trading just a few tens of dollars higher than it had been trading in 2013, right before the biggest slide of the recent years.Something doesn’t add up with regard to gold’s bullish outlook, does it?Exactly. Gold is not yet ready to soar, and if it wasn’t for the pandemic-based events and everything connected to them, it most likely wouldn’t have rallied to, let alone above its 2011 highs before declining profoundly. And what happens if a market is practically forced to rally, but it’s not really ready to do so? Well, it rallies… For a while. Or for a bit longer. But eventually, it slides once again. It does what it was supposed to do anyway - the only thing that changes is the time. Everything gets delayed, and the ultimate downside targets could increase, but overall, the big slide is not avoided.Let’s say that again. Not avoided, but delayed.And this is where we are right now. In the following part of the analysis, I’m going to show you how the situation in the USD Index is currently impacting the precious metals market, and how it’s likely to impact it in the following weeks and months.Riding investors’ emotional roller coaster, the love-hate relationship between financial markets and the USD Index is quite absurd. However, with alternating emotions often changing like the seasons, the greenback’s latest stint in investors’ doghouse could be nearing its end. Case in point: with the most speculative names in the stock market enduring a springtime massacre, beneath the surface laughter has already turned into tears. And while gold, silver and mining stocks have been buoyed by the intense emotional high that’s only visible on the surface, it’s only a matter of time before the veneer is lifted.To that point, while I won’t romanticize the USD Index’s recent underperformance, it’s important to remember that extreme pessimism is often the spark that lights the USD Index’s fire.Please see below:To explain, the bars above track various market participants’ four-week allocations to the U.S. dollar, while the horizontal light blue line above tracks the USD Index. If you analyze the right side of the chart, you can see that fund flows have fallen off of a cliff in recent weeks. However, if you analyze the behavior of the USD Index near Jan-20, Jan-21 and Mar-21, you can see that extremely pessimistic fund flows are often followed by short-term rallies in the USD Index. As a result, with the latest readings already breaching -4 (using the scale on the left side of the chart), USD-Index bears have likely already offloaded their positions.What’s more, not only did the USD Index end last week up by 0.10%, but the greenback invalidated the breakdown below its head & shoulders pattern – which is quite bullish – and also invalidated the breakdown below its rising dashed support line (the black line below). Moreover, while the greenback fell below the latter again on May 14, the short-term weakness is far from a game-changer as the breakdown is not confirmed.Please see below:On top of that, with the USD Index hopping in the time machine and setting the dial on 2016, a similar pattern could be emerging. To explain, I wrote on May 11:While the self-similarity to 2018 in the USD Index is not as clear as it used to be (it did guide the USDX for many weeks, though), there is also another self-similar pattern that seems more applicable now. One of my subscribers noticed that and decided to share it with us (thanks, Maciej!).Here’s the quote, the chart, and my reply:Thank you very much for your comprehensive daily Gold Trading Reports that I am gladly admitting I enjoy a lot. While I was analyzing recent USD performance, (DX) I have spotted one pattern that I would like to validate with you if you see any relevance of it. I have noticed the DX Index performing exactly in the same manner in a time frame between Jan. 1, 2021 and now as the one that started in May 2016 and continued towards Aug. 16. The interesting part is not only that the patterns are almost identical, but also their temporary peeks and bottoms are spotting in the same points. Additionally, 50 daily MA line is almost copied in. Also, 200 MA location versus 50 MA is almost identical too. If the patterns continue to copy themselves in the way they did during the last 4 months, we can expect USD to go sideways in May (and dropping to the area of 90,500 within the next 3 days) and then start growing in June… which in general would be in line with your analysis too.Please note the below indices comparison (the lower represents the period between May-Dec 2016 and higher Jan – May 2021). I am very much interested in your opinion.Thank you in advance.And here’s what I wrote in reply:Thanks, I think that’s an excellent observation! I read it only today (Monday), so I see that the bearish note for the immediate term was already realized more or less in tune with the self-similar pattern. The USDX moved a bit lower, but it doesn’t change that much. The key detail here would be that the USDX is unlikely to decline much lower, and instead, it’s likely to start a massive rally in the next several months - that would be in perfect tune with my other charts/points.I wouldn’t bet on the patterns being identical in the very near term, though, just like the late June 2016 and early March 2021 weren’t that similar.As soon as the USD Index rallies back above the rising support line, the analogy to 2016 will be quite clear once again –the implications will be even more bullish for the USDX and bearish for the precious metals market for the next several months.Please note that back in 2016, there were several re-tests of the rising support line and tiny breakdowns below it before the USD Index rallied. Consequently, the current short-term move lower is not really concerning, and forecasting gold at much higher levels because of it might be misleading. I wouldn’t bet on the silver bullish forecast either. The white metal might outperform at the very end of the rally, but it has already done so recently on a very short-term basis, so we don’t have to see this signal. And given the current situation in the general stock market – which might have already topped – silver and mining stocks might not be able to show strength relative to gold at all.If that wasn’t enough, the USD Index’s long-term breakout remains intact . And when analyzing from a bird’s-eye view, the recent weakness is largely inconsequential.Please see below:Moreover, please note that the correlation between the USD Index and gold is now strongly negative (-0.92 over the last 10 days) and it’s been the case for several weeks now. The same thing happened in early January 2021 and in late July – August 2020. These were major tops in gold.The bottom line?After regaining its composure , ~94.5 is likely the USD Index’s first stop. In the months to follow, the USDX will likely exceed 100 at some point over the medium or long term.Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is doing (and likely to do) better than the Eurozone and Japan, and it’s this relative outperformance that matters , not the strength of just one single country or monetary area. After all, the USD Index is a weighted average of currency exchange rates and the latter move on a relative basis.In conclusion, with investors and the USD Index likely headed toward reconciliation, the greenback’s medium-term prospects remain robust. With macroeconomic headwinds aligning with technical catalysts, investors’ risk-on inertia is already showing cracks in its foundation. And with the USD Index considered a safe-haven currency, a reversal in sentiment will likely catapult the USD Index back into the spotlight. Moreover, with gold, silver and mining stocks often moving inversely to the U.S. dollar, the mood music will likely turn somber across the precious metals market. The bottom line? With the metals’ mettle likely to crack under the forthcoming pressure, their outlook remains profoundly bearish over the next few months.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Intraday Market Analysis – DAX Back To Peak

Intraday Market Analysis – DAX Back To Peak

John Benjamin John Benjamin 18.05.2021 07:39
GER 30 retests record highGermany’s DAX 30 claws back previous losses as the economic outlook brightens.On the daily timeframe, the latest sideways action has allowed the RSI to drop back to the neutrality area, which is good news for a breakneck bull market.On the hourly chart, strong momentum above the last leg of the sell-off indicates traders’ conviction in buying the dip.April’s high at 15520 is the main obstacle and a breakout could push the index to a new record high. 15220 is the closest support in case of a pullback.USDJPY retraces for supportThe Japanese yen stayed muted as the country’s GDP contracted slightly more than expected in Q1.The surge above 109.70 is an indication that buyers have regained control after a two-week-long consolidation. The US dollar is pulling back after the RSI overshot to 80.Buying interests are likely to be found at the demand area between 108.65 and 108.90. Further down, a drop to 108.30 may extend the consolidation.On the upside, bulls could trigger a broader rally if they succeed in clearing the resistance at 109.70.EURGBP recovers after RSI divergenceThe euro inched higher after Eurozone bond yields climbed to multi-month highs. The pair is still in a recovery phase following last week’s sell-off.The RSI divergence has signaled a deceleration in the bearish momentum. The breakout above 0.8610 has prompted more sellers to take profit, lifting pressure on the single currency.0.8640, support turned into resistance is the next hurdle. A bullish breakout could send the price to 0.8680. 0.8560-90 is the demand area if the pair needs to find bids.
Stock Market Attempts To Break Support Channel – What's Next?

Stock Market Attempts To Break Support Channel – What's Next?

Chris Vermeulen Chris Vermeulen 19.05.2021 22:12
The recent price volatility related to the surprise Jobs number, nearly ten days ago, and the potential for inflationary price trends extended beyond the Fed expectations has created a unique type of sideways price rotation on the INDU chart.  This recent price volatility suggests the markets are struggling to identify future trend bias as well as attempting to shake out certain traders and investors (running stops).Additionally, the downside price trend we've recently seen in Lumber, breaking away from the continued rally mode, and Bitcoin, breaking downward nearly -54% from recent highs, suggests a broad market “washout” is taking place.  How far will this trend continue?  Will the US stock market break downward like Bitcoin has recently done?  Let's take a look at the charts and try to answer some of these questions.Before we continue exploring charts, I suggest readers review some of my recent research posts relating to this potential downward price trend in the US/Global markets, including: Are We Days Away From Potential Gann/Fibonacci Price Peak? (March 17, 2021); Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues (April 25, 2021); and Are Apple, Tesla, and Bitcoin Entering a Technical ‘Excess Phase Top’? Should You Be In Cash Right Now? Part II (May 15, 2021).Expect Continued Price Volatility As Markets Attempt To Establish New TrendsWe'll start by exploring the Dow Jones Industrial Average Daily chart, below, and the first thing we want to highlight is the extended upward (YELLOW) price trend channel.  This upward sloping price channel has been in force since the March 2020 COVID-19 lows.  It was confirmed by the November 2020 lows and retested in March 2021.  Typically, when price channels this strongly over an extended period of time, the price channel becomes a psychological barrier/wall for price trending.  When it is breached or broken, price trends often react moderately aggressively – with excessive volatility.Over the past 10+ days, near the right edge of this chart, we can see that price has started to react with much higher volatility and broad sideways price trends.  It appears the INDU chart has entered a new phase of market price activity – moving away from moderately low volatility bullish trending and into much higher volatility sideways rotation.  We attribute this to a shift in how traders and investors perceive the future actions of the US Fed and how risks are suddenly much more prominent than they were 3+ weeks ago.  It appears the “rally euphoria” has ended and traders are starting to adjust expectations related to a slower economic reflation of the global economy.Depending on how traders and investors perceive the future growth opportunities in the US and global markets, as well as how new strains of the COVID-19 virus may continue to disrupt global economies, we may see a fairly big change in trend throughout the rest of 2021 and possibly into 2020.  In our opinion, the tremendous rally phase that took place between October 2020 and now has been anchored on the perception that the COVID vaccines would allow for an almost immediate and nearly full economic recovery attempt.  Now, after we are seeing various new strains of COVID ravage India, Europe, Africa and parts of South-East Asia, expectations may be changing quickly.Everything Hinges On How Price Reacts Near The YELLOW Support Channel LineThis Weekly Dow Jones Industrial Average chart highlights the same upward sloping price trend from the March 2020 COVID-19 lows.  It also shows the start of the broad market rotation over the past three weeks and highlights three key “standout lows” that we interpret as critical support levels.  These support levels are at $32,090, 30,575, and $29,875.Sign up for my free trading newsletter so you don’t miss the next opportunity!If we continue to see downward price trending which breaks through the YELLOW upward sloping price channel line, it is very likely that price will continue to move lower while attempting to find new support near these standout low price levels.  This suggests any breakdown in the INDU may prompt a further -5% to -11% downside price move.If the recent price rotation stalls and continues to find support above the YELLOW upward sloping price channel line, then we expect the US markets to transition into a sideways bottoming formation which will prompt another rally attempt in the near future. Everything hinges on what happens over the next few weeks related to this key YELLOW upward sloping price channel.What this means for traders and Investors is that certain market sectors are still posed for strength and growth over the next 6 to 12 months.  The recent downside price volatility suggests broad market concerns related to a continued reflation trade are certainly evident in how the markets are trending.  Yet, within this potential sideways rotation, there are sectors and trends that still present very real opportunities for profits. If the major US indexes find support above the YELLOW price channel line and attempt to mount another rally, traders need to be prepared for this potential opportunity in the markets – attempting to target the best and strongest market sectors.As I just mentioned, everything hinges on what happens over the next few days and weeks related to the YELLOW price support channel.  One way or another, the markets are either going to attempt to rally higher while this support channel holds or a bigger breakdown event may take place as price breaks below the support channel and attempts to find new, lower, support.Learn why we moved our BAN clients into CASH over a week ago and learn how we use the BAN trading strategy to manage risks and take advantage of the strongest market sectors. Please take a minute to learn about our BAN Trader Pro strategy and how it can help you identify and trade better sector setups.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.Enjoy the rest of your day!!
Your Week Ahead: S&P 500 to Commodities Ratio May Tell a Story

Your Week Ahead: S&P 500 to Commodities Ratio May Tell a Story

Finance Press Release Finance Press Release 24.05.2021 16:37
As commodities rise, are there any clues about the direction of broader US markets? Measuring correlations can help to spot trends across asset classes.As we head into the new week, we want to be aware of the impending data releases that can affect timing and sentiment. This week is a mild to moderate week on the US economic data side of things, with the largest market impact event happening on Thursday, May 27th, in the form of Preliminary GDP q/q (quarter over quarter) . This number is reported in an annualized fashion (so it is the quarterly change x4). Market participants are forecasting a print of 6.4%. Also, bear in mind that this is the Preliminary GDP number. There are three different GDP data releases, the Advance GDP (earliest indication and usually most impactful on markets), Preliminary GDP (this one), and then Final. A bullish print usually strengthens the US Dollar (not always, but usually).Other than the GDP print, FOMC members Brainard, and Bostic speak on Monday morning, FOMC member Evans speaks on Tuesday morning, and we have Consumer Confidence data on Tuesday, as well. More Fedspeak is in store for Wednesday, with FOMC member Quarles speaking, leading up to the GDP print on Thursday. Thursday also features US Unemployment Claims and Pending Home Sales. Finally, on Friday, we get the Core PCE Price Index which measures the price of services and goods (ex-food and energy) purchased by consumers (not businesses). This data release could warrant some attention due to the inflationary pressure that has been present in the markets as of late .Overall, it will be a moderate economic data release in the US. I always like to know what data will be coming out, and when, as a trading week begins.Correlations. Traders love them. They tell a story that really cannot be quantified unless studying the raw data. As we have had so much attention going to inflation lately, it is a good time to review the broader market S&P 500 vs. commodities to get an idea of the relationship between them.Figure 1 - SPX/SPGSCI TVC Monthly Candles November 1992 - May 2021. Source tradingview.comHere we have a long-term chart of the SPX (S&P500) divided by the SPGSCI (S&P Goldman Sachs Commodity Index). So, we have the ratio between the two instruments to inspect. We can see the large blowoff top price action that occurred in this ratio in Q1 2020 as a result of the pandemic (Crude trading negative, anyone?). There is a nice pullback from the blowoff top levels of the pandemic. The question becomes, is that the top or is it time to be long equities and short commodities? Friday’s PCE data could give us another clue. If buying pullbacks tickles one’s fancy in a contrarian fashion, this could be some food for thought.Figure 2 - SPX/SPGSCI TVC Daily Candles October 28, 2019 - May 21, 2021. Source tradingview.comDrilling down to the daily candles, we do see an interesting formation that could potentially indicate support of this trade between the 7.70-8.00 levels. The level has been key on the last three tries. Notice the horizontal price support and the MACD (12,26,9) starting to look bullish here. In addition, we have the RSI(14) crossing the 50 line.So, what does all of this mean? Trading ratios does require some knowledge and arithmetic. A trader would need to be long an identical X dollars worth of one instrument and short X dollars of the other to make it work. Do you have experience with this type of pairs trading?For now, let’s just explore the potential that the S&P 500 could be inexpensive compared to the commodity basket that the SPGSCI measures. Is one of them “cheap” or is the other “expensive”? Or both? Given the S&P 500 earnings multiple, money printing, and other policy directives from the new US administration, it may be simple to conclude that stocks are overpriced, and commodities will go up in a straight line. H owever, is trading really that easy? Bull markets, such as the one in the S&P 500, do not tend to go out in a whimper. Instead, they tend to go out with a bang.In the May 10th publication , we were examining the Invesco MSCI Sustainable Future ETF (ERTH) given the US infrastructure bill, new administration, and other factors. Now, for our premium subscribers, let’s revisit ERTH , and see what the price action may be telling us, given recent market developments. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Rafael Zorabedian Stock Trading StrategistSunshine Profits: Effective Investment through Diligence & Care* * * * *This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits' employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.
Rising Cost Pressure - What Will Mr. Powell and Mr. Gold Do?

Rising Cost Pressure - What Will Mr. Powell and Mr. Gold Do?

Finance Press Release Finance Press Release 25.05.2021 15:53
The latest IHS Markit Flash U.S. Composite PMI signals very fast economic expansion – but also strong inflationary pressure. Good news for gold, overall.On Friday, the recent IHS Markit Flash U.S. Composite PMI has been published . There are two pieces of news for gold - one good and one bad. Let’s start with the negative information. The report signals an unprecedentedly fast expansion in business activity in May . Indeed, the composite index surge from 63.5 in April to 68.1 this month established a new record.More importantly, both manufacturing and services sectors’ markets have shown strong growth. The former index rose from 60.5 in April to 61.5 in May (also a new record), while the PMI for services soared from 64.7 to 70.1, marking the sharpest jump since data collection for the series began in October 2009. Such an unprecedentedly fast acceleration of growth in the PMI signals strong economic growth, which is clearly bad news for the safe-havens such as gold (however, strong economic growth is something everyone expected, so it might be already priced in as well).The good information is, however, that at least part of this growth is inflationary , as soaring demand greatly improved the firm’s pricing power. And the input costs have surged, leading to the sharpest rise in output charges since the end of the Great Recession when the data collection started:Increasing cost burdens continued to be keenly felt, as the rate of input price inflation soared to a new survey record high, often linked to a further marked worsening of supplier performance. Commonly noted were increases in PPE, fuel, metals and freight costs amid significant supplier delays.The steep rise in costs fed through to the sharpest increase in output charges since data collection began in October 2009, with record rates of inflation registered for both goods and services as soaring demand boosted firms’ pricing power.What’s more, wage inflation is also coming , as the report says that entrepreneurs couldn’t find people to fill the vacancies. It seems that generous benefits introduced in a response to the recession discouraged people from searching for work, and slack in the labor market is greatly exaggerated.Although a solid expansion in staffing levels eased some pressure on backlogs in the service sector, manufacturers registered the fastest rise in work-in-hand on record amid raw material shortages. While job creation was again seen in the goods-producing sector, the rise was the slowest for five months, linked in part to difficulties filling vacancies.In other words, the post-pandemic natural employment will be simply lower because of the institutional changes, not because of weak aggregate demand. How would you explain otherwise the fact that entrepreneurs cannot find workers amid employment lower by 8 million when compared to the pre-pandemic level?But this is good news for gold. The subdued employment would be a great excuse for the Fed to say that there is slack in the labor market, the aggregate demand is weak, and the economy remains fragile and below the Fed’s targets, so it still needs easy monetary conditions. Hence, Powell would stay passive and would even avoid starting to think about tapering the quantitative easing and hiking interest rates . Dovish Fed and rising prices would support gold prices.So, high inflation (see the chart below) should remain with us for a while . Indeed, manufacturers worry that raw material shortages “could extend through 2021” and producer price inflation translates into consumer price inflation with a certain lag. Anyway, high inflation won’t disappear in one or two months, but it could last for at least a few or even several months if the Fed remains ultra- dovish and people lose confidence in the central bank’s ability to maintain price stability.If this scenario happens, inflation expectations could cease to be “well-anchored” and inflation could get out of control, just as it did during stagflation in the 1970s. Chris Williamson, Chief Business Economist at IHS Markit, seems to agree with me in his comment on the report:The May survey also brings further concerns in relation to inflation, however, as the growth surge continued to result in ever-higher prices. Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months.Implications for GoldWhat does the recent IHS Markit Flash U.S. Composite PMI imply for gold? Well, strong economic activity is bad for gold, given that it usually shines during bad times. However, the yellow metal doesn’t like genuine, real growth, but it performs pretty well during inflationary periods . Of course, part of the growth comes from the reopening of the economies, but there is no doubt that this expansion is accompanied by high inflation.I’ve been warning readers since the very early part of the pandemic that the following expansion will be more inflationary than the previous one. This is excellent news for gold, which entered a bear market in 2011-2013 (i.e., when the former expansion settled down). What’s important here is that the economic environment is more inflationary (we have easier monetary and fiscal policies ) while at the same time the Fed is highly tolerant of high inflation – this is a truly dangerous cocktail, but it could be quite tasty for gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Option Traders Are a Bit Too Calm Again

Option Traders Are a Bit Too Calm Again

Monica Kingsley Monica Kingsley 25.05.2021 16:18
S&P 500 rose once again, and the slight retreat before the close isn‘t an issue in light of constructive credit markets. Tech, communications, industrials, value, real estate and financials rose while healthcare and notably utilities didn‘t play along. VIX has calmed down yet again, but the put/call ratio scored bullish complacency readings not seen for months. The boat is increasingly getting tilted towards the bullish side - but open long profits can keep growing.Credit markets though aren‘t flashing warnings signs – be that corporate bonds, Treasuries of various maturities, or different Treasury spreads such as the 10 to 2 year one. It‘s just the dollar that is tanking here on the Fed telegraphing taper vs. the market continued bet that it‘s still bluffing, for now:(…) Stocks, bonds and currencies aren‘t reacting much – it‘s only commodities that are in consolidation mode, but this can be chalked down to inflation expectations calming down over the prior three trading days. Until the Fed truly moves or makes its forward guidance as unequivocal as can be in this respect, the markets would be in a doubting attitude (or at a minimum, a wait and see one).The S&P 500 is firing on both cylinders at the moment, with technology jumping higher off very oversold levels, and $NYFANG not lagging too noticeably behind. Nasdaq is well bid at the moment, and it remains to be seen how value takes to retreating yields in the still ruling reopening trades atmosphere.Gold and miners aren‘t flashing warning signs, and the silver outperformance isn‘t a call to the exit door. The charts and macroeconomics speak in favor of continued bullish consolidation before a spurt higher in all three assets. And as the Fed isn‘t perceived in the least as about to get tough(er) (whatever that means, cynics would say), the path of least resistance remains up as the copper to 10-year yield ratio confirms. No, not too much cream has come off in commodities. Open gold profits can keep growing at their own pace but I wouldn‘t be surprised by a brief setback first either..Crude oil bulls have proved themselves on the Iranian (no) sanction news, and the oil index ($XOI) remains overall constructive, but favoring a little pullback in black gold first. The downswing attempt I wrote about yesterday, is increasingly unlikely now while the upside potential got greatly exhausted. Time to wait for another mispricing – one that would offer corrections to join the budding trend.Bitcoin and Ethereum still remain vulnerable as the prior buying fizzled out without taking on the upper border of the $38,000 - $40,000 zone that would let the bulls start turning the tide. It hadn‘t happened yet, and the retracement of yesterday‘s upswing is reaching a bit too far for both Bitcoin ($37,000) and Ethereum ($2,435) – the lookout remains tense.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookS&P 500 path of least resistance still looks to be up, and Nasdaq 100 definitely feels like joining (black line). The tired chart look still favors some consolidation first, though.Credit MarketsThe debt markets, whether corporate or Treasury ones, favor the stock market upswing to continue. The sentiment is turning back to risk-on.Technology and ValueTech driven by both riskier segments and $NYFANG is equally participating as value is in the S&P 500 upswing.Gold, Silver and MinersGold sector keeps cooling off, unchallenged on the downside. Nominal yields posture remains positive.Silver offers a little roller coaster ride, but the copper to 10-year Treasury yield ratio is still in quite fine shape, and real rates aren‘t biting.Bitcoin and EthereumThe tug of war is at a precarious stage – how much of yesterday‘s gains would be erased today? The bulls don‘t seem to be out of the woods yet.SummaryS&P 500 faces little immediate danger of plunging lower – we are about to have a likely uneventful session today.Gold and miners aren‘t however remotely seriously challenged by the bears, and consolidation before another upswing (also in silver) seems most probable.Crude oil has reached the top of its recent range, expecially when the oil sector is considered.Bitcoin and Ethereum still remain at crossroads, but the coming upper or lower knot‘s prominence, would be telling.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
Gold & the USDX: Correlations

Eerily Serene Risk-off Markets

Monica Kingsley Monica Kingsley 26.05.2021 15:29
S&P 500 had a mixed day, and the credit market underlines the shift to risk-off. Halfway shift, to be precise – the high yield corporate bonds recovered the intraday downside but value sold off all the way to the closing bell. Well, rising yields used to add to tech‘s problems since mid Feb, and retreating yields don‘t breathe enough life into the sector now. It‘s clearly visible that the high beta segments are facing the yields‘ headwinds while $NYFANG is in the black, but more than a little lagging.The Treasury market reprieve I announced on May 18 to last more than a good few weeks, is here. While it works to lift tech and hamper value, the days of value doing fine are far from over as the VTV:QQQ ratio illustrates:(…) We‘re still in the value outperforming growth environment (reflation and reopening themes), it‘s just right now (last few days) that tech is pulling stronger ahead than value. ... Value‘s reaction to the yields trajectory ahead would be telling, and I have no doubts there is quite some more juice left in the long value trade (and that the Russell 2000 isn‘t rolling over to the downside here).Emerging markets are welcoming the dollar woes and yields reprieve, and the Russell 2000 isn‘t too much of a drag either. VIX refused further downside yesterday, and is hedging off bets as much as the option players do – no change in prior trends here, just a move away from the complacent end of the spectrum. The stock bull run is still about dips being bought.The key move is in the debt markets, and concerns inflation (expectations). For now, it appears that the Fed trial baloons (Kaplan, even Yellen – thinking about talking taper, suggesting rate hikes) have worked in dialing back the inflation trades to a degree (stock market correction isn‘t thus necessary for players to pile into Treasuries) – more about the Fed‘s „coming soon“ taper bluff:(…) The market simply isn‘t convinced the Fed is serious about taking on inflation through (gradual) removal of the punch bowl – or about shaping its forward guidance credibly this way (yet). Inflation expectations are cooling down a little, and the Treasury market is tracking them closely. But this doesn‘t mean that bonds are taking the central bank seriously – this move is part and parcel of the transitory vs. getting (practically permanently unless a Fed game changer arrives – still unlikely) elevated inflation readings debate.While I think that the red hot CPI inflation would die down a little (i.e. not keep rising ever as steeply as was the case with Wednesday‘s data) once the year on year base to compare it against normalizes, a permanently elevated plateau of high and rising inflation would be a reality for more than foreseeable future simply because the Fed would be as behind as Arthur Burns was in fighting the 1970s inflation, and upward price pressures in the job market pressures would kick in.The much awaited Jun 10 CPI readings would likely come on the hotter side of the spectrum, but would be part and parcel of a continued move to a higher inflation environment where commodities‘ pressures are amplified by job market ones – not that the distortions and disincentives to work wouldn‘t be there.Gold and silver are set to benefit, either way you look at it. Be it through the Fed or market‘s perceptions of the Fed (i.e. buying into its bluff), nominal rates are retreating while real rates remain very constructive for continued precious metals run. The only short-term warning sign comes from miners that aren‘t surging higher. Open gold and silver profits can keep growing at their own pace but I wouldn‘t be surprised by a brief setback first either:(…) The charts and macroeconomics speak in favor of continued bullish consolidation before a spurt higher in all three assets. And as the Fed isn‘t perceived in the least as about to get tough(er) (whatever that means, cynics would say), the path of least resistance remains up as the copper to 10-year yield ratio confirms. No, not too much cream has come off in commodities. Crude oil traded with little volatility yesterday, but the bulls are a little short-term exposed as the oil index ($XOI) shows. Downswing attempt, however modest, shouldn‘t be surprising.Bitcoin and Ethereum are recovering in fits and starts, and the picture is turning bullish especially for the latter. With Bitcoin, the upper border of the $38,000 - $40,000 zone hasn‘t been cleared yet, but the signs from both Ethereum and Cardano are bullish already. It surely seems the market doesn‘t want to crash some more right now as the rally hasn‘t run out of steam yet.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookS&P 500 wavered a little yesterday, with signs pointing to more significant overnight deterioration not materializing. Nasdaq 100 is likewise probably going to consolidate its gains next – unless the value trade kicks in again, disregarding the yields‘ growing calm.Credit MarketsThe debt markets recovery is on, and I am looking at high yield corporate bonds for clues as to the S&P 500 upswing veracity.Technology and ValueTech was driven just by $NYFANG yesterday, pointing to the strong risk-off nature of yesterday‘s session.Inflation ExpectationsBond yields and inflation expectations are turning down relatively sharply, continuing to track each other closely. It certainly looks like we‘re in for a calm summer (my prior words).Gold, Silver and MinersGold and silver rising while miners keep lagging behind, isn‘t a truly bullish sign. Wait and see is the right course of action as there hasn‘t been any reversal (let alone attempt at it), protecting sizable open profits.The weekly perspective offers mixed view of miners to gold ratio‘s breather while the copper to 10-year yield isn‘t budging – yet (see above what I wrote about taking the cream off commodities).Crude OilBlack gold is a little extended here, and consolidation of recent sharp gains is the most likely outcome, the oil index says so too.SummaryYesterday‘s S&P 500 posture deterioration is likely to remain temporary unless the credit markets move down, taking Nasdaq 100 with them. Muddle through seems most likely for today.Gold and silver upswing would be on sounder footing when the miners decide to join, and do away with the stark non-confirmation.Crude oil has reached the top of its recent range, expecially when the oil sector is considered – an opportunity after readjustment to no Iranian sanction news, is in the making.Bitcoin and Ethereum are likely to continue their recovery, overcoming the key resistance zone in the first, and reasserting upside momentum in the latter (the overnight price action has been very positive).Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
US Economic Data Prints Softly, US Dollar Mostly Flat

US Economic Data Prints Softly, US Dollar Mostly Flat

Finance Press Release Finance Press Release 26.05.2021 16:22
US economic data disappointed yesterday. The SPX remained largely unaffected as the dollar remained quiet. Does this remind you of anything?When a market is in Goldilocks mode, the “data doesn’t matter”. However, is the current landscape very Goldilocks-like? There seems to be lingering uncertainty behind the curtain that would not lend itself well to such a scenario.Yesterday’s US CB Consumer Confidence data showed some weakness, missing market expectations of a 119.2 print, and coming out at 117.2. It is not the worst miss in the world, and I don’t think it surprised many US-based market participants. This data release is a medium impact announcement historically and does not pack the punch of a Non-Farm Payroll number. But, it is still a weak print keeping in mind that the previous month’s release was revised downward, from 121.7 to 117.5. It seems that the shine from the US reopening trade may be fading.Figure 1 - CB Consumer Confidence Monthly Releases March 2019 - May 2021. Source investing.comNo doubt rising inflation has US consumers a bit more cautious with their dollars these days.On the same day, market participants heard from the Census Bureau with the latest new home sales data. Another bearish print here, with a print of 863K vs. market expectations of 950K. If you are in the US and live in a hot market, this data may come as a surprise. New Home Sales is also not the heaviest market impact release out there, but I have always paid attention to it. When New Home Sales slow, the trickle effects are real in several industries, including furniture, mortgages, and appliances. Some local real estate markets are so overheated, that one would think that reality has to set in at some point soon. Is this just a temporary blip?Figure 2 - United States New Home Sales May 2020 - May 2021. Source tradingeconomics.comInterestingly enough, these soft prints had little impact on the US Dollar. Usually (and I use the word usually in a liberal sense here), bearish US economic data will send the US dollar lower. The dollar actually bounced intraday off these data releases, which could be a clue that traders may be covering some hefty short dollar positions. The data releases create liquidity, and traders with large positions need liquidity to get out of the other side of such a trade. Just a theory, folks.I suggest reviewing our publication from May 19th here , which outlines some key technical levels in the US Dollar Index that we are currently monitoring. The DXY is trading very close to a key level.Figure 3 - US Dollar Index 15 Minute Candles May 25, 2021 - May 26, 2021. Source tradingview.comAs we can see above, the DXY did not get sold on the bearish data releases. The data came out at 10 AM ET yesterday. In fact, it popped intraday and then slid off its highs, rebounding as the European session approached on May 26th. Interesting, right?When data releases are bearish, and the impacted markets do not necessarily trade in the consensus direction, it takes me back to a time in 2007 - 2008. Data seemed to pour in on the bearish side, yet the equity markets just went up, up, up. More on that soon.Now, for our premium subscribers, let’s review the markets that we are following. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Rafael Zorabedian Stock Trading StrategistSunshine Profits: Effective Investment through Diligence & Care* * * * *This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits' employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.
Stock Market Cycles Tipping The Balance From Euphoria To Complacency - Is Gold Setting Up For A Rally Above $2000 Again?

Stock Market Cycles Tipping The Balance From Euphoria To Complacency - Is Gold Setting Up For A Rally Above $2000 Again?

Chris Vermeulen Chris Vermeulen 27.05.2021 01:28
Gold has set up a very strong confluence pattern across multiple foreign currencies recently.  This upside confluence pattern suggests that Gold has now moved into a much stronger bullish price phase compared to various currency pairs.  This upside move in precious metals aligns very well with my broad market cycle phase research. I urge traders/investors to start paying attention as we transition into this new longer-term cycle phase.Recently, my team and I published a series of articles related to these longer-term cycle phases and how they related to the current market trends.  The biggest concept we want to highlight is that we've transitioned away from an Appreciation cycle phase and into the early stages of a Depreciation cycle phase.  Often, near this type of transition, the global markets experience a unique type of Excess Phase Peak.  This type of price pattern happens because traders/investors are slower to identify the end of a trend and often attempt to continue the Thrill/Euphoric phase of the previous market trend – until the markets prove them wrong.You can review some of our most recent research posts about these topics here: US Dollar Breaks Below 90 - Continue To Confirm Depreciation Cycle Phase (May 23, 2021); Bitcoin Completes Phase #3 Of Excess Phase Top Pattern - What Next? (May 20, 2021) and; What To Expect - A Critical Breakout Warning For Gold, Silver & Miners Explained (May 18, 2021).Stock Market CyclesThe custom graphic shown below highlights the phases of typical market trends through various stages of market trends.  My team and I believe we have crossed the peak level (or are very near to that crossover point) and have begun to move into the Complacency and Anxiety phases of the market trend.  As suggested, above,  the psychological process for traders/investors at this stage is to hope and plan for the never-ending bullish price trend while the reality of the market trend suggests a transition has already started taking place and the market phase has shifted.Our research suggests the last Appreciation phase in the market took place from mid/late 2010 to mid/late 2019.  That means we started a transition into a Depreciation cycle phase very near to the beginning of 2020.  Our belief that a moderate price rotation is pending within the markets stems from the excess phase rally that took place after the COVID-19 virus event.  We've witnessed the sideways price trend in precious metals over the past 8+ months which suggested that global traders were confident an economic recovery would take place (eventually).  Yet, the question before everyone is, as we move away from an Appreciation cycle phase and into a Depreciation cycle phase, what will that recovery look like?  Can we expect the recovery to be similar to levels seen in the previous Appreciation cycle phase?  Let's take a look at how these phases translated into trends in the past.Appreciation and Depreciation Cycle PhasesThe first Depreciation cycle phase (1983~1992) took place after an extended deflationary period where the debt to GDP was rather low comparatively. It also took place within a decade or so after the US moved away from the Gold Standard.  The strength in trending we saw in the US stock market was directly related to the decreasing interest rates and strong focus on credit/equities growth throughout that phase.The second Depreciation cycle phase (2001~2010) took place after the DOT COM rally prompted a huge boom cycle in equities and as a series of US/global events rocked the US economy.  First, the September 11, 2001 attack in New York, and second, by the engagement in the Iraq War.  Additionally, the US Fed was actively supporting the US economy after the 9/11 terrorist attacks, which prompted many American's to focus on supporting a stronger US economy.  This, in turn, prompted a huge rally in the housing market as banks and policies supported a large speculative rally (FOMO) in Real Estate.The current Depreciation cycle phase (2019~2027+) comes at a time where the US Fed has been actively supporting the US/global economy for more than 11 years and after an incredible rally in Real Estate and the US stock market.  Additionally, a new technology, Crypto currencies, has taken off throughout the world as an alternate, decentralized, asset class – somewhat similar to how the DOT COM rally took off. As we've seen this incredible rally in global equities, Cryptos, commodities and other assets over the past 7+ years, we believe the last Appreciation cycle phase is transitioning into an Excess Phase Peak (see the Euphoria/Complacency phases above), which may lead to some incredibly volatile price trends in the future.Sign up for my free trading newsletter so you don’t miss the next opportunity!You may be asking yourself, “how does this translate into precious metals cycles/trends?” after we've gone through such a longer-term past cycle phase review...The recent upside price trends in precious metals are indicative of two things; fear and demand.  First, the economic recovery and new technology are increasing demand for certain precious metals and rare earth elements (such as battery and other technology).  Second, the move in Gold and Silver recently is related to credit, debt, economic and cycle phase concerns.  As we've seen Bitcoin move dramatically lower and as we start to move into a sideways price trend in the US stock market, there is very real concern that the past price rally has reached an intermediate Excess Phase Peak.Please take a moment to learn about our BAN Trader Pro strategy and how it can help you identify stock market cycles, which phase we are in, and how that will lead us to trade better sector setups.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.Have a great day!!
Gold Surpasses $1,900. What’s Next?

Gold Surpasses $1,900. What’s Next?

Finance Press Release Finance Press Release 27.05.2021 16:45
Gold surpassed $1,900 most recently – and it’s likely that the rally will continue for a while.Gold bulls have an opportunity to celebrate. As the chart below shows, the price of gold has been rising recently. And yesterday (May 26) it finally jumped above $1,900, which is an important psychological level.The question we should ask now is “what’s next?” Well, as the jokes go on, the price of gold will either go up or down. But in earnest, there are significant downside risks for the yellow metal. First of all, the Fed could overreact to rising inflation and increase real interest rates .However, these worries seem to be overblown. The Fed’s monetary policy is always asymmetrical, i.e., it eases its stance in response to recession more than it tightens it in response to inflation. The federal funds rate gets lower and stays at these low levels for longer, partially because of all the enormous indebtedness of the contemporary economy.The tapering is surely the risk that looms on the horizon. But the Fed will maintain its quantitative easing and zero-interest-rate policy for at least the rest of 2021. So, there is still room for gold to move further north , especially after the recent turmoil in the cryptocurrency market resulting in renewed confidence in gold as an attractive inflation hedge .After all, the US monetary policy is loose, and real interest rates are still in negative territory. The fiscal policy remains very easy, and the public debt is high. Inflation is huge and rising. And there is also an issue of depreciation of the greenback . The Fed’s easy stance, low interest rates and high inflation weaken the US dollar, supporting gold prices.Last but not least, the level of risk appetite/confidence in the Fed and the economy has already reached its peak, as the GDP has recovered with an unprecedentedly high pace of growth. In other words, the post- pandemic euphoria is behind us – now the harsh, inflationary reality sets in. Maybe we won’t repeat the 1970s stagflation , but inflation is probably more deeply embedded than the Fed thinks. And it seems that the markets are finally getting this idea, pushing some investors into gold’s warm and shiny embrace .Implications for GoldWhat does it all mean for gold prices? Well, recently two broad trends have dominated the markets: rising inflation expectations and rising economic confidence. In other words, market participants expected reflation . However, economic confidence has peaked, and now investors focus more on inflation. So, we are moving slowly from the reflation phase to the inflationary phase, which is beneficial for gold – if this trend continues, the yellow metal could continue its upward march.Every investor should remember one great historical pattern, basically as old as the Roman Empire. The money supply is first aggressively boosted with the excuse that “there is no inflation”. When upward pressure on prices becomes clear, that excuse transforms into “inflation is transitory” or into “the rise in inflation is caused by idiosyncratic factors”. Have you heard about Arthur Burns, the Fed Chair in the 1970s and the predecessor of Paul Volcker ? As Stephen Roach notes on him:Over the next few years, he [Burns] periodically uncovered similar idiosyncratic developments affecting the prices of mobile homes, used cars, children’s toys, even women’s jewelry (gold mania, he dubbed it); he also raised questions about homeownership costs, which accounted for another 16% of the CPI. Take them all out, he insisted!Finally, the officials admit that there is inflation, but they blame it on speculators and other external, unfavorable or even hostile factors. To be clear, I’m not predicting hyperinflation or even double-digit inflation in the US, but recent economic reports suggest that upward price pressure could be more lasting than the Fed and the pundits believe.So, inflation could remain elevated for a while , especially given that the description of Burns downplaying it is worryingly similar to the current Fed’s stance under Powell . As Stephen Roach points out, the current size of fiscal and monetary stimuli is unprecedented, especially taking into account the pace of the recovery:Today, the federal funds rate is currently more than 2.5 percentage points below the inflation rate. Now, add open-ended quantitative easing – some $120 billion per month injected into frothy financial markets – and the largest fiscal stimulus in post-World War II history. All of this is occurring precisely when a post-pandemic boom is absorbing slack capacity at an unprecedented rate. This policy gambit is in a league of its own.Indeed, but gold loves chess, gambits included. After all, chess is a royal game, while gold is a royal metal!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Gold & the USDX: Correlations

Will Gold Shine Under Bidenomics?

Finance Press Release Finance Press Release 28.05.2021 17:46
Bidenomics is a big departure from sound economics. But when reason sleeps, gold fortunes are born.Biden’s triumph in the presidential election does not just mean that a new man lives in the White House. It actually implies a fundamental shift in economic policy . Some analysts even see Biden’s agenda as a decisive break with neoliberalism or “Washington consensus”.You see, in the old orthodoxy, most economists trusted in markets, argued for privatization, deregulation, and liberalization. Taxes and social benefits should be low and don’t discourage work and investments. The governments should run balanced budgets, avoiding large and permanent fiscal deficits , while central banks should hike interest rates to prevent inflation from running out of control.The focus was on scarcity and limited supply. The economy was believed to operate generally at potential, so the key factors to fast economic growth were structural reforms and adequate supply-side policy to strengthen incentives to work and invest. Governments shouldn’t run fiscal deficits as they could crowd out private investments, and they shouldn’t stimulate the demand as it would misallocate resources and could overheat the economy, leading to inflation. The monetary policy was better suited to occasionally fight economic crises .How much has changed! Now, the focus is on slack and the demand side of the economy. The growth is held by chronic lack of demand – this is the key tenet of Keynesian economics, the hypothesis of secular stagnation, and the Modern Monetary Theory – so, governments and central banks should continuously stimulate the economy through easy monetary and fiscal policies . As real interest rates are low and demand is weak, rising public debt is not a problem. Inflation is not a problem either; after all, if there is always slack in the economy which operates below its full potential, there is practically no risk of inflation.Indeed, Biden has pushed the American Rescue Plan Act of $1.9 trillion (or about 9%of the GDP ) without presenting any plan of longer-term deficit reduction. And additional huge government expenditures are coming with Biden’s infrastructure plan. It seems that no one is interested any longer in how the government is going to pay for its spending and obligations, or in long-term consequences of practically unprecedentedly large fiscal deficits (see the chart below). Interest rates are low, so let’s live like there’s no tomorrow!Another notable example is, of course, the Fed’s new monetary framework. The US central bank has ultimately disregarded the idea of the Philips curve and the natural rate of unemployment . There is no level of employment that could boost the inflation rate, so there is no need for any preventive actions. What really counts is the actual inflation rate, not the expected one. The central bank shouldn’t fight with symmetrical deviations from the economy’s long-term path determined by technological progress and other supply-side factors any longer, but only with shortfalls from the full employment.So, what does Bidenomics (and Powellomics) imply for the gold market? Well, Biden is not the first politician who thinks that there are no economic limits to his ideas. But the pandemic and the economic crisis, the environment of ultra-low interest rates, and the fact that the Democratic base has shifted further to the left implies that Bidenomics may become a radical departure from sound economics. However, a crazy idea that “borrow & spend without a limit” is the key to prosperity is positive for the gold market , as the yellow metal is a safe-haven asset and a hedge against insane economic policies.What is important here is the fact that we have actually tested this approach. In 1960, just like today, the Keynesian economists who dominated in the mainstream (and politicians who trusted them) thought that the main task of economic policy is to actively and permanently stimulate aggregate demand. The result was stagflation in the 1970s, as it turned out that economies may overheat as well. Gold shined then, so it should also benefit today from similarly unsound economic ideas and policies.So far, the pace of economic recovery has been fast, while the inflation rate has remained limited. But this may change quickly when people stop trusting that the Fed and the government will swiftly take action to contain inflation if it breaks out. However, given the current mindset and macroeconomic ideas, how probable is it that the policymakers will accept substantial interest rate hikes, cuts in spending, and probably also a recession when faced with 1970s-style inflation? Not very likely, indeed. Hence, if inflation continues to rise, while the Fed remains ultra- dovish , inflationary expectations may become unanchored, and inflation may get out of control taking gold with it on a wild journey north.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Your Week Ahead: PMI, Payrolls, Ranges, and Higher Volatility?

Your Week Ahead: PMI, Payrolls, Ranges, and Higher Volatility?

Finance Press Release Finance Press Release 01.06.2021 16:02
Thinking back to 2007 - 2008, I remember a time when the economic data just kept coming out rosy, even though I deeply suspected there was an underlying shoe to drop due to real estate and overlending. At the time, it seemed like every economic print was bullish, and the $SPX just kept climbing and climbing. It can be frustrating; when you may have the correct outlook, but just too early.This concept is one of the most important things a trader can recognize; his or her timing. The market will dictate when you are right, and your wallet will reflect the harsh reality of when you are wrong.With that being said, we turn our attention to the big data releases scheduled for June.The Big One : Traders are looking to the Non-Farm Payrolls report on Friday, June 4th, at 8:30 AM ET. The market is expecting a gain of 645K - 670K here after last month's huge miss of 266K actual vs. 990K expected. Friday ought to be a doozy, with Fed Chair Powell speaking beginning at 7:00 AM ET and then the big jobs number.But before we get to Friday, the ISM Manufacturing PMI is slated for release on Tuesday, June 1st, at 10:00 AM ET. This data will give market participants a view into business conditions, including employment, supplier deliveries, production, and more. This data release can be viewed as a precursor or clue to Friday’s Non-Farm Payroll Data. Then there is ISM Services PMI on Thursday. It is a big week for economic data releases in the US, with the granddaddy of all of them on Friday.So, heading into the week, what is the S&P 500 telling us?Figure 1 - $SPX S&P 500 SPX November 6, 2020 - May 28, 2021 Daily Candles Source stockcharts.comThere are several interesting things happening with the S&P 500. Coming out after a practically flat month of May (thanks to jobs data and inflation data), we see the MACD(12,26,9) throwing a bullish signal here, with the fast line crossing the slow line. RSI(14) is above 50, and we are currently trading well above the 50-day SMA of 4115.23.While it may not seem logical, most signs seem bullish at this time, after a month of sideways trading and consolidation . One could reason that the jobs data and inflation that has been gaining steam should hurt the index. However, wouldn’t inflation make stocks more expensive too? It is something to think about. We have to keep a pulse on the US Dollar Index for clues.What is happening in the $VIX ?Figure 2 - $VIX Volatility Index 2000 ETF February 21, 2019 - May 28, 2021 Daily Candles Source stockcharts.comThere are no surprises here in the $VIX over the longer term. The massive spike caused by the pandemic has been steadily sold, with options sellers sucking up premiums akin to a vacuum cleaner. Although, there have been spikes along the way. Around the close on Friday, the $VIX caught my eye due to its close as the $SPX gave up around 10 handles between 3:00 PM and 4:00 PM ET.Figure 2 - $VIX Volatility Index 2000 ETF March 29, 2021 - May 28, 2021 Hourly Candles Source tradingview.comThe hourly candles show $VIX down near its April lows and catching a nice hourly pop on Friday near the close. Friday was the last day of the month, so there could have been some book squaring and month-end activity that contributed to the pop. It was nothing outrageous, but this action coupled with being near the bottom end of the recent range caught my attention.There are some mixed signals for the S&P 500 at the moment.Since this week has so much data coming in, I would expect volatility to get bid up and options to become more expensive due to higher implied volatility. Given the flat month of May in the $SPX , I would view it as an overall bullish continuation pattern when factoring in the daily technicals. However, at the same time, the $VIX is near its lower end of the range.Therefore, I am prepared for sideways trading in a wide range in the $SPX until the market gets a read on the NFP data.Now, for our premium subscribers, let's further review the $SPX and the other markets and key levels that we are covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Rafael Zorabedian Stock Trading StrategistSunshine Profits: Effective Investment through Diligence & Care* * * * *This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits' employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.
Biden Proposes $6 Trillion Budget. Will Money Flow Into Gold?

Biden Proposes $6 Trillion Budget. Will Money Flow Into Gold?

Finance Press Release Finance Press Release 01.06.2021 16:02
Biden proposes $6 trillion of government spending in the 2022 fiscal year. This continuation of ultra-loose fiscal policy could support gold in the long run.On Friday (May 28), the White House presented the President’s budget for the 2022 fiscal year that starts on October 1, 2021. Biden trumped Trump and proposed $6 trillion, over one trillion more than Trump in his last year’s proposal for $4.8 trillion. Furthermore, POTUS wants to raise government outlays to up to $8.2 trillion by 2031.According to the White House, the proposed fiscal agenda will further increase the total federal debt-to-GDP ratio , from the current 129.1% to 136.9% by 2031. Meanwhile, the federal debt held by the public is estimated to rise from the current 100.7% to 108.5% of the GDP. The current level of the US public debt compared to the size of the economy is presented in the chart below.Despite the increase, Janet Yellen , Treasury Secretary, said that “it is a fiscally responsible program”. Yeah, right. Of course, it’s true that real interest rates are very low, and therefore the debt service costs are bearable; but the interest rates could go up one day. And even when the bond yields are low, there is still the crowding out effect and other negative consequences, as higher government expenditures imply higher taxes and fewer resources for the private sector. Last but not least, the GDP has practically returned to the pre-pandemic level, so such big fiscal programs are clearly excessive and could add to inflationary pressure.Implications for GoldWhat does the budget for the next fiscal year mean for gold prices? Well, although Trump was trumped in the last elections, trumpism is still doing well. Here I’m referring to the fact that Trump started to balloon the government spending and fiscal deficits well before the pandemic . Then the coronavirus hit and the fiscal policy became even looser. And now President Biden raises the stake, widening the budget deficit and public debt despite the recovery from the economic crisis .In the short term, it doesn’t have to be good news for gold. This is because big deficits and federal debt could exert upward pressure on the Treasury yields, resulting in higher interest rates, which would suppress the price of gold.Also of importance is the fact that the 2021 fiscal year was a period with an unprecedented size of the fiscal stimulus. So, although Trump proposed ‘only’ $4.8 trillion of government spending and almost $1 trillion of deficit, the actual numbers were much bigger: $7.2 and $3.7 trillion, respectively. In contrast, Biden’s proposal sees the budget deficit worth ‘only’ $1.8 trillion. In relative terms, the fiscal deficit is projected to decline from the current 16.7% to 7.8%.Of course, the actual numbers will probably be bigger than the White House’s projections. But still, when compared to the previous year, the fiscal policy will become tighter – on a relative basis. However, the fiscal policy will remain ultra-loose; the fiscal deficits are never assumed to decline below $1.3 trillion or 4.2 percent of the GDP, and the public debt is projected to reach a level not seen since World War II.However, the Fed is ready to intervene if the interest rates increase too much. And, at some point, the current ‘debt elephant’ will become too big to pretend it’s not present in the room. The current policy mix of ultra-loose monetary policy and ultra-loose fiscal policy (despite the economic recovery) is unprecedented and raises the risk of a debt crisis in the more distant future. It seems that some policymakers are starting to notice that, as they switched their narrative from “debt is no problem” to “we have to pay for it through raising corporate taxes”. We can see that even in the White House’s document, as it factors in an increase in the corporate tax rate from 21% to 28%.Hence, the continuation of the US’s irresponsible fiscal policy could add to the positive momentum in the gold space, especially while taking into consideration that all these new social and infrastructure programs arrive during a period of economic expansion and inflationary pressure. So, the era of big government (with bigger government expenditures and fiscal deficits) and higher inflation is back. It could be, thus, an era of shining gold.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
When Markets Get Scared and Reverse

When Markets Get Scared and Reverse

Monica Kingsley Monica Kingsley 03.06.2021 16:09
S&P 500 wasted another good opportunity to rise – one where the credit markets were largely aligned. Is it a sign of upcoming tremors that the 500-strong index couldn‘t defend the daily gains? Commodities weren‘t under pressure, the dollar wasn‘t surging (looking at the closing prices), precious metals did well, and even lumber enjoyed a white candle again.Inflation expectations retreated, and so did Treasury yields – what‘s holding stocks then? Neither uncertainty about the Fed policy, nor surging inflation cutting into P&L, nor crashing bonds – what we‘re seeing is run of the mill volatility as stocks move both into a structurally higher inflation environment, and await Fed moves which are much farther down the time line than the markets appreciate. Heck, even the option traders keep undergoing the earlier announced shift to complacency.Yes, the taper talk has dialed back the inflation trades to a degree, but hasn‘t knocked them off in the least. In a reflation, both stocks and commodities do well, and we‘re still far away from worrying about weakening GDP growth rates (today‘s ADP and unemployment data are a good proof thereof) – in my view, worries about inflation not retreating nearly enough during this Treasury market lull (taking up this summer) would come into the picture first.Reopening trades aren‘t over, the housing market activity (housing starts, new home sales) has slowed down a little while XLRE keeps running, financials remain as strong as value (yes, there is more juice in that trade still), and no mad rush into tech (growth) is underway. Capacity utilization isn‘t at the top of the pre-corona range exactly, and oil prices (these serve as additional tax, a drag on the economy) aren‘t biting nearly enough. The job market isn‘t at the strongest either, and the hours worked don‘t match prior extremes either. Last but not least, global supply chains haven‘t entirely recovered to meet the reopenings-boosted demand.Plenty of extra reasons why I talked the transitory vs. getting structurally elevated (unanchored) inflation yesteerday:(…) The Treasury market‘s lull only means that inflation trades have been dialed back somewhat, but haven‘t been broken. As I wrote on May 27, so far it‘s only the precious metals that are relentlessly calling the Fed‘s bluff – by rising almost in a straight line. And when you thought the transitory or permanently elevated inflation debate couldn‘t get any more ridiculous, there comes the Dudley dove talking how transitory could become permanent – it‘s almost as miraculous as being half pregnant.Seriously, it‘s a testament to the Fed communication‘s success that the transitory story has been swallowed hook, line and sinker to this degree. We‘re getting a temporary reprieve but the cost-push inflation isn‘t going away. At the same time, we‘re in a reflationary period before inflation starts biting noticeably more. How close before the wheels come off, and would that come from inflation or growth worries? There are two distinct possibilities: GDP growth and its projections start sputtering, or inflation (including inflation expectations) don‘t come down nearly enough as much as the transient camp believes. I‘m in the latter camp.Timing is everything, though. Any growth scare wouldn‘t materialize before we „discover“ that inflation isn‘t really going away. Add the job market pressures entering the fray – discussed on May 19 – you‘ll sooner take fright over persistent inflation hitting the growth prospects than seeing them downgraded first. No deflationary scare quarters ahead either, sorry – 2021 will be another good year in stocks.This also speaks against a sharp (think 10% and higher) correction in the stock market over the summer, and likewise affects commodities. These would employ a wait and see approach, with precious metals sticking out like a sore finger. Forget the taper dog and pony show. When the Fed is forced to move, precious metals win – either way.In other words, we‘re undergoing stock market and commodities‘ gyrations as we‘re settling into the new reality of higher inflation including expectations, which isn‘t yet putting the stock market to test. Neither the 10-year yield rising way over 2.5% would derail the sttock bull run – but the associated volatility would be keenly felt already at the 2% level. We‘re very far from that, meaning I am not worried about the stock market leadership baton passing exlusively over to tech (growth) stocks. That would equal panic.Gold ascent is slowing down, but miners don‘t support a lasting downswing. Volatility around the $1,900 mark, yes but a plunge on stock market downswing / Fed tapering / commodities reversal, no – as if any of the three actually applied. After initial selling when liquidity needs to be raised no matter where from (the AMC saga coming soon to a theater near you), gold is likely to recover, and faster than silver (the white metal would suffer from any marked slowdown in inflation, I must add).Crude oil rose strongly once again, and so did the oil index – the energy sector ETF is doing great. The daily chart still remains bullish, offering no clues of a reversal, let alone of a correction.Bitcoin and Ethereum recovery goes on, and I‘m looking for more base building before the bulls take on and overcome the red ETH resistance line featured on Tuesday. Patience is needed before more confidence returns into the sector.Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 OutlookS&P 500 and Nasdaq wavering in latest days is an eloquent warning sign that the bears will try their luck – and they would ultimately fail.Credit MarketsHigh yield corporate bonds actually outperformed the rest of the crowd, making the SPX stumble harder to stomach.Technology and ValueTechnology had a mixed day while value remains unyielding. It‘s true that the daily leadership was with XLK yesterday, but that still remains white noise as value isn‘t yet down and out. Not by a long shot.Gold, Silver and MinersGold rose a little stronger than the miners yesterday, but the move in either shouldn‘t be overrated. While the yellow metal can‘t break higher with confidence now, its dips remain to be bought.The copper to 10-year Treasury yield ratio stabilized yesterday, but the swing in either copper or long-dated Treasuries spells no short-term calm.Bitcoin and EthereumBitcoin and Ethereum charts are solidly recovering, but some breather next wouldn‘t surprise me. Overall, the stage remains set to go higher.SummaryWhat doesn‘t go up, must come down – but look for any S&P 500 downside to be largely bought when the dust settles.Gold and silver remain well bid, but the slowing pace of gains means that the bears might come out from hibernation – only to be repelled though. Look for copper to stabilize as a precondition, with miners not falling through the floor.Crude oil odds favor a new upleg to proceed, but unless commodities and metals rebound, black gold would get vulnerable.Bitcoin and Ethereum are peeking higher, and rebound continuation is more probable than other scenarios.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
The Return of Inflation. Can Gold Withstand the Dark Side?

The Return of Inflation. Can Gold Withstand the Dark Side?

Finance Press Release Finance Press Release 04.06.2021 12:49
Inflation broke into the economy violently. It’s a destructive, dark force. But gold can resist it, being after all a much stronger asset than Anakin Skywalker.Last month, I wrote that “inflation is knock, knock, knockin’ on golden door”. I was wrong. Inflation didn’t knock, it broke down the door! Indeed, as the chart below shows, the core CPI surged 3%, while the overall CPI annual rate soared 4.2% in April – this is twice the Fed’s target!Now, the question is whether this elevated inflation will turn out to be just “transitory”, as the Fed and the pundits claim, or become more permanent. On the one hand, given that April-May 2020 was the worst phase of the pandemic with the deepest price declines, the current high inflation readings are perfectly understandable, and we could see lower numbers later this year.On the other hand, inflation may be higher and/or more persistent than many analysts believe . After all, the April reading came as a shock for them and even for the top US central bankers. For example, Richard Clarida, the Fed Vice-Chair, said: “I was surprised”. It shows that there is more in high inflation than just the base effect. Indeed, the CPI index with February 2020, i.e., the last pre-pandemic month as a base, has jumped 3.1% so far – lower but still significantly above the Fed’s target.It shouldn’t be surprising given the surge in the broad money supply and increase in fiscal transfers to citizens. Incomes are higher and people are ready to spend their money. Stronger demand met with supply shortages, so the prices rose. And what is important, the increases are widespread: from commodities to used cars and houses.However, there are a few important upside risks to inflation . First, a rise in wages. Although employment is far from the pre-epidemic level, entrepreneurs struggle to find workers. Therefore, they could be forced to increase wages to pull employees away from generous government benefits. If passed on, higher input costs would translate into higher consumer prices.Second, a housing boom . Rising housing prices show that inflationary pressure is something more than just CPI inflation, and all this could drive shelter inflation higher. More importantly, though, as shelter dominates in the CPI basket, the official inflation would rise as a result.Third, an increase in inflationary expectations. In May, the University of Michigan index that gauges near-term inflation expectations surged to 4.6%from 3.4%in April. What’s important, the index that measures inflation expectations for the next five years also rose – from 2.7% in April to 3.1% in May, which is the highest level in a decade. As the chart below shows, the market-based inflation expectations have also been surging recently.This is a very important development, potentially even a game-changer. You see, inflation remained low for years partially because Americans didn’t expect high inflation. They used to see persistent inflation as a thing of the past. They had strong confidence in the Fed , believing that the US central bank would quickly intervene to prevent inflation.However, that belief could go away now . The Fed’s new monetary framework and officials’ speeches clearly indicate that the US central bank has become more tolerant of higher inflation. The Fed has returned – just like in the 1970s – to focus on full employment and its “shortfalls” instead of deviations, forgetting that economies can become too hot as well as too cold. Given the dominance of doves in the Fed – but also in the Treasury with Yellen as a Secretary – one can reasonably doubt whether or not the US central bank is ready to hike the federal funds rate in response to higher inflation. Just like in the years before the Great Stagflation , the Fed could decide that it’s better to live with inflation than bear the pain of combating it.More importantly, such a fight would be challenging now, as the public debt is a few times higher.As the chart below shows, the federal debt held by the public is now 100% of the GDP , four times larger than throughout the 1970s. Hence, the increase in interest rates would amplify fiscal deficits even more. To paint the perspective, April’s core CPI was the highest since 1982, when the Fed was trying to control inflation, and interest rates were double-digit. So, the government would be obliged to cut its expenditures, while the climate is rather to spend as much money as possible. Therefore, the Fed is under strong pressure not to tighten its monetary policy .What does all this mean for the gold market? Well, when people question the willingness or ability of the government and central bank to tame inflation, they expect it to go higher, which increases the actual inflation and make it more persistent. Such a negative surprise, with inflation expectations unanchored, would make prices rise abruptly – but also the demand for gold as an inflation hedge would increase . Given the widespread economic repercussions and elevated uncertainty triggered by higher inflation – which is one of the biggest threats to this economic cycle – gold could gain as a safe-haven asset .Of course, gold is not a perfect inflation hedge in the short term. If interest rates increase or the Fed tightens monetary conditions in response to inflation, gold may struggle. Actually, a start of normalization of the monetary policy could push gold downward, just as it happened in 2011.However, given the current pretending that “there is no inflation” by the Fed, it’s likely that the US central bank won’t react promptly, remaining behind the curve. The delay in tightening could de-anchor inflationary expectations and trigger an inflationary spiral, pushing real interest rates down but also gold prices up.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Another Taper Mirage Comes and Goes

Another Taper Mirage Comes and Goes

Monica Kingsley Monica Kingsley 04.06.2021 16:01
S&P 500 succumbed to the bears – partially. The ADP figures lifted the dollar and put Treasury yields under pressure, which equals encouraging speculation that taper is coming. Rest assured, it isn‘t in practice, apart from communication exercises otherwise known as forward guidance, all happening during a week when the Fed injected $32bn into the markets. Today‘s non-farm payrolls can modestly boost that fata morgana, but it‘s a taper bridge too far. They can‘t meaningfully tighten, and they know it – look what happened last time Powell emphatically insisted (Dec 2018).But the market reaction is what matters, and yesterday‘s session in (not only tech) stocks, precious metals and commodities, highlights the degree to which the transitory inflation story has been swallowed hook, line and sinker, dialing back the inflation commodity trades meaningfully (sideways). Should the transition into a higher inflation environment be appreciated for what it is, the dive in gold, silver and copper wouldn‘t have been that steep. On the other hand, the sharpest moves tend to be the countertrend ones – yes, I‘m still of the opinion that the current reflationary period with reopening rush (more juice left in value over growth trades) is conducive to higher stock market and commodity prices. Including precious metals, naturally.For more proof, look at the barely budging inflation expectations (TIP:TLT rather than RINF which got spooked a bit too much – similarly to tech yesterday), and have a read of my extensive Wednesday and Thursday analyses, well worth it each but best when combined for your daily dose of countenance in the markets. What‘s new now, are the taper starting date (as if the discussion was initiated in the first place at all) considerations:(…) what‘s holding stocks then? Neither uncertainty about the Fed policy, nor surging inflation cutting into P&L, nor crashing bonds – what we‘re seeing is run of the mill volatility as stocks move both into a structurally higher inflation environment, and await Fed moves which are much farther down the time line than the markets appreciate. Heck, even the option traders keep undergoing the earlier announced shift to complacency.Yes, the taper talk has dialed back the inflation trades to a degree, but hasn‘t knocked them off in the least. In a reflation, both stocks and commodities do well, and we‘re still far away from worrying about weakening GDP growth rates (today‘s ADP and unemployment data are a good proof thereof) – in my view, worries about inflation not retreating nearly enough during this Treasury market lull (taking up this summer) would come into the picture first.Moreover, the taper talk and market reaction to it, are exposing a key vulnerability in the Treasury market. The Fed is well aware that its ample support is a condition sine qua non, and that rising yields (rising real rates) aren‘t in the largest borrower and real economy‘s interests. Financial repression has to come into the picture, and that‘s one of the reasons why precious metals have been on a tear lately. We‘re also a long way from inflation breaking the back of stock market bulls:(…) we‘re undergoing stock market and commodities‘ gyrations as we‘re settling into the new reality of higher inflation including expectations, which isn‘t yet putting the stock market to test. Neither the 10-year yield rising way over 2.5% would derail the sttock bull run – but the associated volatility would be keenly felt already at the 2% level. We‘re very far from that, meaning I am not worried about the stock market leadership baton passing exlusively over to tech (growth) stocks. That would equal panic.Gold got spooked, and the PMs dive bore signs of panic, but like it or not, the weakness has been consistent with the commodities retreat. While gold is the ultimate currency, real money in the JPM‘s own admission, it‘s sensitive to real rates moves – and expectations thereof. These took a hit yesterday, and it was as I warned earlier, more readily apparent in silver. Quoting yesterday‘s comment at my own site:(…) ADP data came in positive, dollar rose and so did yields as the market (incorrectly) thinks that taper is closer. And tomorrow’s strength in non-farm payrolls would only reinforce that. The truth is though that the Fed can’t withdraw some liquidity, raise rates or even slow down the monetary expansion. Gold and commodities beyond copper (not oil though) are reacting, and miners don’t offer clues that this daily setback would be over. The taper smoke and mirrors game got a new lease on life, but the inflation trades aren’t over.In other words, we have a way to go in stabilizing the metals, but these prices would prove a buying opportunity – not a selling one.Oil is a different cup of tea – rising but not yet exerting enough pressure to sink the GDP growth story. Elevated, but supported by the oil index. A breather next would not be unimaginable – it would be welcome.Cryptos got hit by the broken heart emoji Elon tweet, well what can I say about such tweets. Doge to the moon next? The bulls need to regain footing, and rather fast.Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq OutlookS&P 500 took a smaller hit than Nasdaq, and the volume in either isn‘t consistent with a reversal storyline. As said yesterday, I am looking for the bears to ultimately fail.Credit MarketsHigh yield corporate bonds intraday reversal is equally worrying as the long-term Treasuries dive to its daily lows.Technology and ValueTechnology including $NYFANG overreacted in my view – but value continued to cheer the rise in yields. That‘s one more reason why stocks aren‘t dipping anywhere far.Gold, Silver and MinersGold plunge doesn‘t reveal weakness through miners leading to the downside, and while respectable, the volume could have been bigger. The plunge seems overdone when nominal yields are concerned.Silver and copper have been the missing pieces in the puzzle of gold‘s steep move yesterday. Note however that the copper to 10-year Treasury yield ratio isn‘t breaking down in any way.Bitcoin and EthereumBitcoin and Ethereum plunged on the headline, but would likely recover as the unrealistic taper expectations are dialed back.SummaryS&P 500 bears served us the raid yesterday, but I am looking for a swift recovery of the ground lost. The taper myth isn‘t simply to be taken seriously.Gold and silver remain well bid, and not even yesterday‘s plunge was a chart game changer. Dips remain to be bought, and the bull run is very far from over. As I wrote yesterday, the bears might come out from hibernation – only to be repelled though. Look for copper to stabilize as a precondition, with miners not falling through the floor.Crude oil is relentlessly rising, and as long as other commodities join in the party, a meaningful correction isn‘t favored. In other words, today‘s price action won‘t almost definitely see one.Bitcoin and Ethereum aren‘t as weak as the chart would suggest, and once yet another Elon disappointment is worked off (high hopes, disappointment, new hopes – wash, rinse, repeat), no thinking about thinking about talking taper would support the crypto bulls.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
Where Next in the Taper Drama

Where Next in the Taper Drama

Monica Kingsley Monica Kingsley 07.06.2021 12:02
S&P 500 duly rose on the little weaker than expected non-farm payrolls as the taper theme (start of discussions moving to serious contemplation) got dialed back. The Fed‘s forward guidance manouevers can continue, and inflation trades breathed a sigh of relief. Encouragingly for the S&P 500, reflation trades weren‘t affected as evidenced by value stocks rising again regardles of the long-dated Treasuries action.Of course, volatility welcomed the retreat in yields as much as technology did – but the option traders aren‘t buying into the upswing nearly as much. Practically speaking, Friday‘s moves in the dollar, some commodities and precious metals, reversed a great chunk of the preceding day‘s bigger swings. The guessing game on the Fed‘s taper goes on, and the upcoming CPI readings won‘t add to the markets‘ peace. Most likely, fuelling the sense of taper urgency as the inflation figures won‘t be coming on the low side. Add in the job market slowly catching fire, and you‘ll understand why I have been calling for months for elevated inflation readings.It‘s the market reaction what matters – what is at stake, is how much the Fed is still expected to fight inflation, whether it plays ostrich in toeing the transitory line much to the satisfaction or dismay of the marketplace. As I wrote on Friday:(…) Should the transition into a higher inflation environment be appreciated for what it is, the dive in gold, silver and copper wouldn‘t have been that steep. On the other hand, the sharpest moves tend to be the countertrend ones – yes, I‘m still of the opinion that the current reflationary period with reopening rush (more juice left in value over growth trades) is conducive to higher stock market and commodity prices. Including precious metals, naturally.Moreover, the taper talk (...is…) exposing a key vulnerability in the Treasury market. The Fed is well aware that its ample support is a condition sine qua non, and that rising yields (rising real rates) aren‘t in the largest borrower and real economy‘s interests. Financial repression has to come into the picture, and that‘s one of the reasons why precious metals have been on a tear lately. We‘re also a long way from inflation breaking the back of stock market bulls.So stocks have taken the risk-on cue, amply reversing Thursday‘s losses – but the same can‘t be said about gold, silver or copper. Precious metals pared Thursday‘s setback to a good degree only, and these words apply to miners as well. Not that conducive conditions hadn‘t been in place to facilitate more gains, but the optimism over Fed moves being dialed back to a more distant future, is more guarded. Understandably so when Janet Yellen would welcome higher inflation and higher rates as per her G7 meeting proclamation. The bulls aren‘t out of the woods – all eyes on nominal yields, inflation expectations and the dollar now.Oil is refusing to budge, and the oil index doesn‘t favor too much downside. Should commodities stall again though, oil would be no exception – in spite of its next upleg getting underway after the long sideways consolidation (with a bullish slant, however).Cryptos can‘t get their mojo, but aren‘t falling through the floor either. The consolidation goes on, and bulls better step in and overcome Thursday‘s highs for the recovery to continue. That‘s not unimaginable for Ethereum or Cardano, though – it‘s only that Bitcoin is acting really weak relatively speaking.Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq OutlookBoth S&P 500 and Nasdaq 100 grew sharply, and if you look under the hood, the signals are positive. If only higher volume confirmed them.Credit MarketsHigh yield corporate bonds met an intraday setback, which is part of the short-term watchouts.Technology and ValueTechnology including $NYFANG dialed back Thursday‘s overreaction – just as was likely, and the value stocks confirming in the upswing stretching over to high beta plays in tech as well, are a positive sign for Monday.Gold, Silver and MinersIt‘s nice that gold recovered from yet another dive but, its white candle could have closed nearer to the daily highs – it‘s concerning that it didn‘t, and the same applies to miners. The return of strength has been suboptimal when nominal rates solely are assessed. Of course, that ties in to the retreat in inflation expectations being the other side of the coin, coupled with rising rates expectation underpinning the dollar.Silver recovered stronger than copper, but the red metal‘s ratio enriched with 10-year Treasury yield view, could have driven stronger gold gains. However, silver‘s outperformance isn‘t worrying here.Crude OilCrude oil is continuing its low volatility rise, volume isn‘t drying up, and the oil index supports the upleg to proceed.SummaryS&P 500 bears got on the defensive again, and credit markets give the bulls benefit of the doubt. How will another attempt at all time highs unfold, is to be closely observed for signs of strength / weakness.Gold and silver remarkably rebounded, but could have recouped even more of Thursday‘s losses. It remains a (short-term) red flag they didn‘t. The bulls haven‘t proved themselves entirely, which can be explained by yields, inflation and dollar.dynamics.Crude oil bullish chart message hasn‘t weakened one iota on Friday, and black gold‘s upleg remains underway – while a meaningful correction isn‘t favored, taking a breather would be healthy.Bitcoin and Ethereum meek recovery, bottom searching after Elon‘s broken heart emoji tweet goes on, and the Miami show didn‘t help much. The longer prices stay this low without steadily attempting a march higher, the more vulnerable they are.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
Gold – Healthy Pullback or Escalation Until Midsummer?

Gold – Healthy Pullback or Escalation Until Midsummer?

Florian Grummes Florian Grummes 07.06.2021 18:52
Gold and silver prices experienced quite a roller coaster ride over the last few days. Given the fast recovery on Friday we see two potential scenarios for the precious metal markets to unfold. Gold – Healthy Pullback or Escalation Until Midsummer?ReviewThe double low at US$1,676 in mid-March and at US$1,678 at the end of March marked the end of the eight-month correction in the gold market. In the past two months, gold was able to recover from this double low by a whopping US$240. Our conservative recovery targets of US$1,785 and US$1,855 were quickly achieved. Furthermore, gold continued its recovery until US$1,916 so far.Over the last two weeks however, the bulls (despite various attempts) failed to recapture the psychological US$1,900 level. Not surprisingly, a fast pullback brought prices back to US$1,856 on Friday early morning in the Asian markets. From here, gold came roaring back to US$1,895 as the latest non-farm payroll US job data missed expectations later during that day.The silver price, on the other hand, was able to hold up somewhat better than the gold price during the entire correction since last august. However, once the attack on the resistance zone around US$30 failed at the beginning of February, silver prices got beaten down together with the falling gold price. Accordingly, Silver reached its low on March 31 at US$23.78. But in contrast to gold, this level thus marked a higher low within the correction that began on August 7th. Currently, silver is trading just below US$28 keeping eye contact with the crucial hard resistance zone around US$30.Overall, thanks to the significant recovery over the last two months, the picture for the precious metals sector has improved significantly. The healthy pullback has been completed. The bull-market is intact. The question now remains how much time gold and silver will need to break out to new all-time highs and what type of pullback(s) we are going to see during the run up to new all-time highs.Technical Analysis: Gold in US-DollarWeekly Chart – Clear Breakout from the Downtrend ChannelGold in US-Dollars, weekly chart as of June 6th, 2021. Source: TradingviewOn the weekly chart, gold prices had managed to easily jump above the downtrend line of the previous nine and a half months in mid of May. Thus, the correction, which began with the new all-time high at US$2,075 on August 7th, 2020, has now most likely ended. Ultimately, this healthy correction seems to have unfolded in a bullish flag pattern.At the same time, gold has been reaching the midline of the three-year uptrend channel (currently around US$1,920). In addition, the 61.8% retracement of the correction at US$1,923 has been missed so far. Thus, the zone between US$1,920 and US$1,925 remains a strong hurdle. If the bulls would manage to break through US$1,925 a quick rally towards the next resistance zone around US$1,950 to 1,960 is extremely likely. This zone around US$1,960 however is a concrete resistance as gold had failed miserably in early November and early January at this level.Overall, the weekly chart is bullish with a slightly overbought stochastic. But there aren't any signals pointing to a pullback or a trend change here. In fact, the bullish momentum makes the continuation of the rally towards US$1,960 quite likely. If on the other hand the pullback from last week gains strength, expect a target zone of US$1,820 to US$1,845. Here, a very good buying opportunity would probably arise shortly before the seasonally best time of the year.Daily Chart – Stochastic With A Fresh Sell SignalGold in US-Dollars, daily chart as of June 6th, 2021. Source: TradingviewOn the daily chart gold had to weather a quick pullback last Thursday and early Friday morning. This pullback led prices back to the upper edge of the former downtrend channel, hence testing the resting breakout. So far, bulls managed to come back immediately, and the daily cycle might have ended in an extremely quick fashion with a low Friday morning in Asia.In the best case, the bulls still have enough fuel to extend the recovery towards the 61.8% retracement at US$1,923 and especially towards the hard resistance around US$1,960. Such an advance would likely free some more momentum (especially in silver) and could even create an escalation until midsummer. An escalation would mean that gold would test the US$2,000 to US$2,025 range before any more significant pullback can unfold.A more defensive perspective on the other hand would be, that a healthy but larger pullback has already started last Wednesday. Gold would likely come under some more selling pressure in this scenario. This could mean a continued sell-off down to the 200-day moving average (US$1,843) and the 38,2%-retracement at US$1,825 within June and July.In both cases gold will test its 200-day moving average at some point. In the “escalation” scenario it would take quite some more time and gold would first explode towards around US$2,000 before a larger pullback would then wipe out all the euphoria later in autumn again. Alternatively, we will get the pullback towards the upper edge of the former downtrend now and gold uses this little correction as a launch-pad for higher prices later in the summer. Subsequently, an attack on the US$2,000 level is expected sooner or later this summer (July to September). Overall, the picture in the precious metals sector has certainly improved considerably thanks to the strong recovery over the last two months. As well, it needs to be noted that the real momentum is going to be in silver market, once the resistance at US$30 is has been overcome.Commitments of Traders for Gold – Healthy Pullback or Escalation Until Midsummer?Commitments of Traders for Gold as of June 6th, 2021. Source: SentimentraderDue to the gold price recovery over the last two months, the Commitment of Trades Report (CoT) has deteriorated again. The cumulative net short position stood at 248,175 contracts as of last Tuesday. In the long-term comparison, this set-up however, is rather high and continues to urge caution and patience. Hence, the CoT-report delivers a sell signal.Sentiment for Gold – Healthy Pullback or Escalation Until Midsummer?Sentiment Optix for Gold as of June 6th, 2021. Source: SentimentraderSentiment numbers for gold are showing a rather neutral rating at the moment. So far, the recovery has not created any significant optimism let alone extreme euphoria. It is however extremely likely that the ongoing recovery will at least see some form of exaggerated optimism before it rolls over or pauses. Thus, sentiment does not stand in the way of a continuation of the rally.Seasonality for Gold – Healthy Pullback or Escalation Until Midsummer?Seasonality for Gold over the last 53-years as of June 6th, 2021. Source: SeasonaxOver the last 53-years a strong seasonal pattern has evolved for the gold market. Accordingly, gold would find its typical early summer low somewhere in June or July. Subsequently, a strong advance would follow in the next step pushing gold prices to a seasonal top around late September or early October.In the current situation this could mean a continuation of the pullback that started last Wednesday over the next few weeks. From a projected low around US$1,820 to US$1,840 gold would then be ready to strongly rally during midsummer.Seasonality for Gold over the last 5-years as of June 6th, 2021. Source: SeasonaxHowever, reducing gold´s historical movements to the last five years shows quite a different seasonal cycle! Hence, in the current bull market since 2016 gold tends to show strength up until mid to end of August before rolling over significantly in September. The weakness in June and July has not been evident over the last five years.Given this statistical evidence gold has quite a high probability of simply continuing its rally towards US$1,960 and US$2,000 to US$2,025 over the next two to three months! Only after such a rally a large pullback would be likely.Sound Money: Bitcoin/Gold-RatioSound Money Bitcoin/Gold-Ratio as of June 6th, 2021. Source: TradingviewWith prices of approx. US$36,000 for one Bitcoin and US$1,890 for one troy ounce of gold, the Bitcoin/Gold-ratio is currently sitting at around 19. That means you now have to pay only 19 ounces of gold for one Bitcoin. Put the other way around, an ounce of gold currently only costs 0.052 Bitcoin. Thus, Bitcoin has lost around 45% against gold to where it traded in March and April.You want to own Bitcoin and gold!Generally, buying and selling Bitcoin against gold only makes sense to the extent that one balances the allocation in those two asset classes! At least 10% but better 25% of one’s total assets should be invested in precious metals physically, while in cryptos and especially in bitcoin one should hold at least between 1% and 5%. If you are very familiar with cryptocurrencies and bitcoin, you can certainly allocate much higher percentages to bitcoin on an individual basis. For the average investor, who is primarily invested in equities and real estate, 5% in the still highly speculative and highly volatile bitcoin is a good guideline!Overall, you want to own gold as well as bitcoin, since opposites complement each other. In our dualistic world of Yin and Yang, body and mind, up and down, warm and cold, we are bound by the necessary attraction of opposites. In this sense you can view gold and bitcoin as such a pair of strength. With the physical component of gold and the pristine digital features of bitcoin you have a complementary unit of a true safe haven for the 21st century. You want to own both! – Florian GrummesMacro update and Crack-up-Boom:FED Balance Sheet. © Holger Zschaepitz via Twitter @Schuldensuehner, June 3rd, 2021.As in almost every other week, the Fed balance sheet has hit a fresh all-time high. Fed chairman Jerome Powell keeps the printing press rumbling despite rising inflation. The total assets expanded by 0.4% to a new record of US$7.94 trillion. The Fed’s balance sheet now equals 36% of the GDP for the U.S..ECB Balance Sheet. © Holger Zschaepitz via Twitter @Schuldensuehner, June 5th, 2021.Of course Madame Lagarde is pushing even harder and the ECB balance sheet is now on course to 80% of Eurozone’s GDP. This rise to the moon looks more and more parabolic as the total assets rose by another 14.5 billion EUR on QE . You can be sure that none of these irresponsible central bankers will have the guts to return to a more sustainable monetary policy.World total stock market cap. © Holger Zschaepitz via Twitter @Schuldensuehner, June 6th, 2021.One of the most obvious consequences is asset price inflation of course. While the worldwide economic has been rather muted the market cap of all stock markets combined hit a new all time driven by the overflowing liquidity provided by nearly all central banks on this planet.But while further rising equity portfolios are certainly to be welcomed by most investors, the increased cost of living is becoming a serious problem for many people. This is true especially since the vast majority of people in any society is always struggling to meet ends needs. They simply don´t own anything that they could invest. Hence the rising tension within most western societies. Those who at least understand what’s going on are forced to become speculators and often use credit and margin to somehow profit from the asset price inflation. However, with credit and margin but without experience they only increase the imbalances in the system.Inflation pops © Holger Zschaepitz via Twitter @Schuldensuehner, May 31st, 2021.Overall, the crack-up-boom is up and running and accelerating. Like a dance on the volcano. And Central bankers are doing everything to outpace any deflationary forces by simply printing more and more. Yet, the worldwide race to the bottom has no exit but is a dead end.Conclusion: Gold – Healthy Pullback or Escalation Until Midsummer?Never before in the last 50 years it was more important to own some physical gold and silver. Independently of any price appreciation or any potential speculative gains. Simply as a protection against the loss of purchasing power and many other looming worst case scenarios.As well from a technical point of view it is vital to now own a full physical position in precious metals. The 8-month pullback from the new all-time high is done and the bulls are back in the driving seat. Once gold sustainably takes out its all-time high at US$2,075 expect an acceleration and a rather quick rally towards approx. US$2,500 and probably higher. By then you will only run behind a train that has left the station. Physical supply is already tight, and premiums are often absurdly high.Technically speaking, gold is in a recovery since March 31st which still has room to continue towards US$1,960 and approx. US$2,025. Judging from the past, gold bulls should have enough strength to push prices towards those two numbers over the coming two to four months. Any pullback or breather on the way higher should be welcomed as one of the last chances to buy gold below US$2,000 and silver below US$30.Hence, the “healthy pullback” scenario over the coming weeks might be perfect for anybody who still needs to get positioned. However, in a bull market surprises are usually happening to the upside and a direct escalation until midsummer would leave many marveling at the wayside.To conclude, buy any dip.Source: www.celticgold.euFeel free to join us in our free Telegram channel for daily real time data and a great community.If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can subscribe to our free newsletter.About the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is also chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks.
US Government Stimulus Went Wrong. How Will Gold React?

US Government Stimulus Went Wrong. How Will Gold React?

Finance Press Release Finance Press Release 08.06.2021 19:18
Gold may benefit from government money flooding households and people less willing to work – as evidenced by the low value of nonfarm payrolls.According to the recent BLS Employment Situation Report , total nonfarm payrolls rose by 559,000 in May, following disappointing increases of 278,000 in April, as the chart below shows. What is disturbing here is that this time the US economy also added significantly fewer jobs than expected – economists surveyed by MarketWatch forecasted 671,000 additions. Moreover, labor force participation and employment-population rates were little changed, remaining significantly below the pre-pandemic levels.On the positive side, the unemployment rate edged down from 6.1% to 5.8%, as the chart above shows. However, even though the number of unemployed people fell considerably from its recent high in April 2020, it remains well above the level seen before the Covid-19 epidemic. In February 2020, 5.7 million Americans were without a job, while now it is 9.3 million. It means that the labor market is still far from recovery . Or, actually, given all the generous unemployment benefit supplements introduced during the pandemic, the new equilibrium unemployment rate may be simply higher than in the past.Implications for GoldAnyway, the new employment situation report is positive for the gold market . May nonfarm payrolls report is disappointingly weak and missed expectations for the second month in a row. It means that the April report wasn’t just an accident, and the US labor market has to face some serious problems.The sad truth is that Americans don’t want to work. Even the decline in the unemployment rate was caused to a large extent by the drop in the labor participation rate, as workers just left the labor market. This fact explains why employers report worker shortages despite an army of a few million unemployed people. According to the recent Fed’s Beige Book , many companies have difficulties finding new employees, so they had to boost their wages to attract candidates:It remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople (…) A growing number of firms offered signing bonuses and increased starting wages to attract and retain workers.Even the BLS admitted that “rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages”. Indeed, wage increases accelerated to 2% in May year-over-year, up from just 0.4% in the previous month. They could add to the inflationary pressure or reduce companies’ margins and investments, reducing the pace of real economic growth. So, the jump in wages seems to be good for gold . Hence, the yellow metal could continue its long-term upward trend after the recent pullback below $1,900 (see the chart below).Additionally, disappointing employment situation news will postpone tapering of the Fed’s quantitative easing . The weak nonfarm payrolls report gives a strong hand to the doves within the FOMC who don’t want to even start talking about talking about tapering. Hence, the US monetary policy should remain very dovish , with the real interest rates at ultra-low levels supporting gold prices . Indeed, the expected path of the federal funds rate , derived from the Fed Fund futures , has declined from the prior levels.In other words, although May nonfarm payrolls report is an improvement when compared to April, the level of employment is still 7.6 million below its pre-pandemic peak. So, even if we see further improvement later this year (which is likely, as many states end the unemployment benefit supplements this month), it will take several more months to fully eliminate the slack in the labor market. The implication is clear: precious metals investors shouldn’t bet on a change in the Fed’s stance anytime soon. And as the yellow metal is very sensitive to tapering fears, this is positive news for gold bulls.If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
EUR/USD: calm before storm on Thursday

EUR/USD: calm before storm on Thursday

Kseniya Medik Kseniya Medik 09.06.2021 14:18
US inflation report and ECB meeting will shake the market on Thursday. More opportunities for traders! Read the article to know how the market will probably react.What will happen?Traders can’t wait for Thursday to come! Why? Two significant events will be out: the US inflation report and the ECB policy decision. They will probably shake the markets and create good opportunities for traders to earn a decent profit!What to expect from ECB?ECB is expected to avoid discussing any changes as the German ZEW economic sentiment came out worse than expected, that’s why the bank doesn’t have enough reasons to tighten the policy.What to expect from US inflation?If the US inflation is greater than the market forecast, the Federal Reserve may start discussing tapering (cutting asset purchases), which in theory would push the USD up. In the opposite scenario, if the US inflation is less than anticipated, the USD may weaken. However, it seems that traders do not expect the Fed to react even if inflation is hot as according to the central bank, inflation is only transitory. No action from the Fed – the USD is likely to fall. Follow the report and catch the overall market flow!Tech outlookOn the EUR/USD chart, the diamond pattern has recently occurred. The pair broke through the lower line at the right, which meant the trend changed its direction downwards and it was interpreted as a sell signal. The pair dropped to 1.2100. From that point, EUR/USD has recovered some of its losses and started modestly rising. The pair has already crossed the 50-period moving average. It needs to break above the 100-period moving average of 1.2200 as well to confirm the bullish momentum. If it manages to cross it, the way up to the high of June 3 at 1.2215 will be open.On the flip side, if it drops below the support zone of 1.2170-1.2160, it may fall to the 200-period moving average of 1.2140 and then to the low of late Mat at 1.2130. Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
Volatility? All Eyes on CPI – Looking Beyond the Data Release

Volatility? All Eyes on CPI – Looking Beyond the Data Release

Finance Press Release Finance Press Release 10.06.2021 13:15
Market participants are all waiting with bated breath ahead of today’s CPI data release. It’s an important one after last month's shocker. So, what’s your plan?In general, data releases can be fickle and tricky events. While they may provide opportunities for algorithmic traders due to short-term spats of volatility, it can be challenging to initiate or exit a position as the market digests the data upon release. Longevity in trading can be achieved by being flat around data releases (or at least not highly leveraged); and/or having a what-if plan already in place.Today’s CPI data (this publication is being written before the data release) could provide some fireworks. Last month, the expectations were for a 0.2% print, and we got 0.8%. Today, the market is looking for 0.4% for the CPI print (includes food and energy) and 0.5% for Core CPI (excludes food and energy). Could this be on the lofty side? Or, will inflation begin to spiral out of control?Keep in mind that we are heading into a Fed Meeting June 15 -16 . If prices continue to rise at an exponential rate, will the Fed really be willing to raise interest rates? It would be appropriate by many standards to do so. However, the theme has been “lower for longer”; and this creates a sense of uncertainty as to what the plan may be if we get another huge CPI print. While neither you nor I have a crystal ball available, my inclination is that the print could be below expectations. If that happens, it would fit the Fed’s “transitory inflation” theme that was discussed in the past. We will find out at 8:30 AM ET today.As traders wait on this data, the $VIX certainly caught a bump in yesterday’s trading.Figure 1 - $VIX Volatility Index March 10, 2021 - June 8, 2021, Daily Candles Source stockcharts.comWe can see some technically bullish signs in the $VIX above, with some long daily tails on the candles coinciding with the April lows. RSI(14) and MACD(12,26,9) are showing bullish crossover signs. The $VIX can be a bit of a tricky barometer to trade technically.Figure 2 - SPY SPDR S&P 500 ETF March 9, 2021 - June 8, 2021, Daily Candles Source stockcharts.comThe SPY indeed put in a down session yesterday with the $VIX higher. As we have been discussing, the S&P 500 is near the higher end of its range and will most likely need a catalyst to get moving one way or the other.The 50-day moving average is $414.58 right now, which is only 1.676% away from the current price. A move down to the 50-day moving average could be of interest.In addition, we can see the Fibonacci retracement levels of interest in the SPY from the May 19th low to the June 8th highs. We see the 50% retracement level @ $414.38 and the 61.8% retracement level at $412.26. I like how the 50% retracement level lines up with the 50-day moving average here.Figure 3 - SPY SPDR S&P 500 ETF March 9, 2021 - June 8, 2021, Daily Candles Source stockcharts.comNext, no one knows with any degree of certainty how the equity markets will react to the CPI print, whether it exceeds or misses expectations. Here is what we do know: the last data release brought the cash S&P 500 near the 50-day moving average, which held up well. It then tested the 50-day moving average four trading sessions later, and it once again held up very well. Could the same type of price action be in store this time?Nobody knows. However, I am inclined to look for a move for a potential pullback opportunity, between $412.26 (61.8% Fibonacci retracement level above) and the 50-day moving average ($414.58 as of the close on June 8th). If the market moves higher off the CPI data, so be it. The market will be there tomorrow. Remember to monitor the 50-day moving average level, as it changes each day!Now, for our premium subscribers, let's recap the eight markets that we are currently covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Rafael Zorabedian Stock Trading StrategistSunshine Profits: Effective Investment through Diligence & Care* * * * *This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. 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Will Gold Rally Continue in the Upcoming Months?

Will Gold Rally Continue in the Upcoming Months?

Finance Press Release Finance Press Release 10.06.2021 15:25
May was certainly a positive month for the yellow metal. Gold could keep its momentum later this year, but a lot depends on the Fed and inflation.We left May in the rearview mirror, and as the chart below shows, it was the second positive month in a row for the yellow metal. Gold rose 7% last month – this is 12.3% since the local bottom on March 31, 2021 . The jump was driven mainly by inflation fears, a weak greenback and a decrease in real interest rates .Hence, I was right: the second quarter has been so far much better for the shiny metal than the first one, in which it declined by 11%. Gold even jumped temporarily above $1,900 at the turn of May and June. Since then, it has been fluctuating around this level. All this means that the yellow metal fully recovered its Q1 losses, finishing last month virtually flat year-to-date.Now, the key question is: what’s next for gold? Outlooks are, as always, divided. Some analysts point out that gold’s struggle to move decisively north above $1,900 amid all the increase in the money supply , public debt and inflation is disturbing and has bearish implications for the future. For instance, the French bank Société Générale still believes that we will see $2,000 per ounce by the end of the year, but its conviction towards this forecast has weakened. I have to admit – the lack of a stronger rally in gold is something I also worry about.But on the other hand, some believe that gold is still in a long-term bull trend . For instance, the World Gold Council , in its latest Gold Market Commentary , points out that sentiment towards gold became more bullish in May , as net positioning on COMEX futures rose to its highest level since February. Moreover, not only gold ETFs recorded their first monthly inflows since January 2021, but also the highest ones since September 2020.Furthermore , the WGC’s 2021 Central Bank Gold Reserves Survey reveals a slightly stronger conviction towards gold , as there is a growing recognition among central banks of gold’s performance during periods of economic crises . The report notes that 21% of central banks expect to increase their gold reserves within the next year (value relatively unchanged from last year’s survey) and that no central bank expects to sell gold this year – down from 4% in 2020.Also, Commerzbank remains bullish on gold despite recent volatility . Although the German bank expects that the Fed will start tapering its quantitative easing by the fourth quarter, it’s forecasting rising inflation. As a result, nominal interest rates will stay below the inflation rate leaving real bond yields significantly below zero.Implications for GoldWhat does all this imply for the gold market? Well, there are both downside and upside risks for gold in the future . Possible drawbacks are the unwinding of the Fed’s bond-buying program and the new tightening cycle . Strengthening expectations of asset purchases tapering and normalization of the ultra-dovish monetary policy could trigger an increase in the interest rates and outflows from the gold market.To the other group of factors, I would include higher inflation. After all, we have never seen such coexistence of dovish monetary policy and easy fiscal policy . Not surprisingly, investors started to worry about record-breaking inflation. As the chart below shows, market-based probabilities derived from options (calculated by the Minneapolis Fed , which computes probabilities from option prices) show that the previous expectations of the CPI annual rate above 3% over five years have significantly increased recently. Higher inflation would increase demand for gold as an inflation hedge and decrease real interest rates, supporting gold prices.So, gold’s future depends on the Fed’s reaction to rising inflation , or whether or not investors will focus on nominal and real interest rates. If the US central bank stays behind the inflation curve, real interest rates will stay in the negative territory, supporting the price of gold. However, if the Fed tightens its monetary policy decisively, or if investors focus on rising nominal bond yields in a response to inflation, the yellow metal may go down.To that point, the most recent changes in the Fed’s framework, comments from the FOMC members and disappointing data about the US labor market suggest that we are far away from any serious tightening. So, gold has room for moving higher.Having said that, it seems that gold needs more negative events (or even a kind of financial crisis ) to rally decisively further . So far, the US economy remains in the boom phase and higher inflation doesn’t seem to significantly disrupt the functioning of the markets. Perhaps gold bulls will have to wait a bit longer until we move from reflation to stagflation . Today’s report on inflation and upcoming FOMC meeting could provide more clues about gold’s future – stay tuned!If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Gold & the USDX: Correlations

The FED Holds the Market. How Long Will It Last?

Finance Press Release Finance Press Release 11.06.2021 15:59
With investors discrediting fundamentals to follow the FED’s instruction, it seems everything relies now on a few people’s say-so.It's a Bird, It's a Plane, It's the FEDWith Jerome Powell, Chairman of the U.S. Federal Reserve (FED), donning his cape like Superman and his monetary crew akin to The Avengers, investors’ faith in the FED was on full display on Jun. 10. Case in point: with the headline Consumer Price Index (CPI) surging by 4.93% year-over-year (YoY) – the highest YoY percentage increase since 2008 – the bond, stock and currency markets barely flinched.The commodity PPI surged by 17.25% YoY in April. And if you exclude the 17.36% YoY jump in July 2008, it was the largest YoY percentage increase since December 1974. For context, the commodity PPI often leads the headline CPI and that’s why tracking the former’s movement is so important. Moreover, reconnecting with the green line implies a ~5.50% YoY percentage increase in the headline CPI.Please see below:And with the indicator proving quite prescient once again, the gap on the right side of the chart was nearly filled on Jun. 10.Furthermore, while investors continue to see the world through the FED’s X - Ray Vision, “base effects” are now the primary defense among the superhero’s supporters. However, as I’ve mentioned on several occasions, it’s important to remember that the core CPI increased by 0.74% month-over-month (MoM). And if you exclude April’s rise of 0.92% (which was only one month ago), it was the highest MoM percentage increase since 1982.Please see below:The FED Has Become Independent Thought’s KryptoniteOn top of that, with the YoY percentage change in the headline CPI running extremely hot, the real federal funds rate is now at its second-lowest level ever . For context, the federal funds rate is the overnight lending rate set by the FOMC, while the real federal funds rate is adjusted for inflation by subtracting the YoY percentage change in the headline CPI.Please see below:So how can we explain investors’ lack of prudence?Well, as Bloomberg eloquently put it on Jun. 10… Source: BloombergThus, with the FED mesmerizing investors and keeping them under its spell, market participants have determined that it’s easier to follow the FED rather than fight it. However, when screaming fundamentals are dismissed as irrelevant, it often ends badly for those who fail to heed the warnings. To that point, while the Producer Price Index (PPI) – which will be released on Jun. 15 – will provide important clues on the inflationary trajectory, Nordea’s trend model signals that YoY CPI prints still have plenty of room to run.Please see below:To explain, the light blue line above tracks the YoY percentage change in the headline CPI, while the dark blue line above tracks the projected YoY percentage change in Nordea’s trend model. If you analyze the right side of the chart, you can see that April and May’s prints were accurately forecasted. More importantly, though, with the dark blue line signaling that the headline CPI should rise by more than 7% YoY in the coming months, investors’ faith in the FED will be put to the test over the medium term.Likewise, even though the FED has become independent thought’s kryptonite, if investors dismiss the scorching inflationary summer, they’ll likely incur deeper burns in the fall.To explain, I wrote on Jun. 10:With the Jun. 15/16 policy meeting not leaving enough time for FED officials to “communicate very early, very often what we’re going to do” (spoken by Philadelphia FED President Patrick Harker) and the Jul. 27/28 policy meeting excluding a summary of the FED’s economic projections, either the Jackson Hole Economic Symposium (late August) or the Sep. 21/22 policy meeting is when the fireworks will likely begin.With the U.S. Bureau of Labor Statistics (BLS) revealing on Jun. 8 that U.S. job openings surged to an all-time high of 9.286 million – and came in well above the consensus estimate of 8.300 million – the only thing depressing the U.S. labor market are ill-advised enhanced unemployment benefits.Please see below:To explain, the red line above tracks U.S. nonfarm payrolls, while the green line above tracks U.S. job openings. If you analyze the relationship, you can see that the latter is often a strong predictor of the former. However, with enhanced unemployment benefits still in effect until mid-to-late June or early July (across ~25 states) – and nationwide until Sep. 6 (expected) – the shift likely won’t occur overnight. But once the benefits expire, U.S. nonfarm payrolls will likely spike in August (reflecting July’s data) and September (reflecting August’s data) and lift the U.S. 10-Year Treasury yield and the USD Index in the process.The bottom line? With a potential spike in the Shelter CPI likely to coincide with a major resurgence in the U.S. labor force, September has all of the necessary ingredients to force the FED’s hand .The ECB Is Not Reducing AnythingOn top of that, I warned that prophecies of the European Central Bank (ECB) reducing its bond-buying program in June were much more semblance than substance.I wrote on Apr. 27 :Recent whispers of the ECB tapering its bond-buying program are extremely premature. With the European economy still drastically underperforming the U.S., it’s actually more likely that the ECB increases the pace of its bond-buying program.And after the ECB released its monetary policy decision on Jun. 10, what was clear before now is the reality.Please see below: Source: ECBIn addition, ECB President Christine Lagarde said the following during her press conference:"The U.S. economic situation and the Euro Area economic situation are very different stories. The two economies are at different points in the recovery cycle. ""Any discussion about exit from the PEPP would be premature, too early, and it will come in due course, but certainly, for the moment it is too early and premature – simple as that.""Any kind of transition, exit, whatever you call it, has not been discussed"And although the ECB increased its Eurozone GDP growth, as well as inflation expectations, and Lagarde even said that “there was [a] debate on the pace of the purchase, on some of the analytical aspects of the use of our instruments,” she reiterated: Source: ReutersThe bottom line?While the EUR/USD remains materially overvalued, the ECB’s policy is not the only fundamental data point that supports this thesis. Case in point: it was a trifecta for Germany (Europe’s largest economy) on Jun. 9, with imports, exports, and consequently the German trade balance, all missing economists’ consensus estimate. To explain, exports rose by 0.30% MoM versus 0.5% expected, imports fell by 1.7% MoM versus a decline of 1.1% expected and the trade balance came in at €15.9 billion versus €16.3 billion expected.Please see below:The S&P 500 Is Losing MomentumFinally, while it may not be visible on the surface, the S&P 500’s momentum continues to decelerate. Even though the U.S. equity benchmark followed the ‘ don’t fight the FED’ mantra to another all-time high on Jun. 10, optimism is waning. Case in point: while the YoY percentage change in the FED’s balance sheet (released on Jun. 10) was roughly flat this week, the YoY percentage change in the S&P 500 continues to move lower. And with a summertime soirée likely the last “hurrah!” for the S&P 500 and the FED’s balance sheet – with all signs pointing to the latter tightening in September – a move lower for both variables will likely occur over the medium term.Please see below:The red line above tracks the YoY percentage change in the S&P 500, while the green line above tracks the YoY percentage change in the FED’s balance sheet. If you analyze the relationship, you can see that investors’ optimism often rises and falls with the pace of the FED’s asset purchases. To that point, the FED’s YoY rate of expansion of its balance sheet peaked (for good) during the third week of February and has been in free fall ever since. Similarly, the S&P 500’s YoY rate of expansion peaked during the third week of March and has declined substantially.The bottom line? With the weekly metric hitting a 2021 low on Jun. 3 and a reduction of the FED’s bond-buying program poised to push the YoY percentage change into negative territory in the coming months (again, likely in September), the S&P 500 is slowly running out of gas.In conclusion, the FED has mesmerized the investing public once again, and saving the day doesn’t even require the central bank to do anything anymore. However, with reality undefeated and a major regime shift likely to occur in September, there are only a few hours left until the clock strikes midnight. Moreover, with bond market imbalances at or near their all-time highs, the PMs will likely detest the forthcoming climax. Think about it: if the PMs can only muster tepid rallies when the fundamentals are historically (though synthetically) tilted in their favor, the price action could get ugly once the sanity finally prevails.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Is Gold Really an Inflation Hedge?

Is Gold Really an Inflation Hedge?

Finance Press Release Finance Press Release 11.06.2021 17:19
Inflation is back, and that’s usually depicted as good for gold. But is the yellow metal still a hedge against inflation, or has something changed?Inflation has returned. This is partly understandable. After all, during the Covid recession , consumers and businesses accumulated a lot of cash as their spending was reduced, while revenues were sustained by money transfers from the government. These funds are now entering the economy, which makes demand grow much faster than supply, thus boosting prices. After some time, supply may catch up, curbing inflation. However, there is an important risk that inflation will turn out to be higher and/or more permanent than many analysts believe.From the fundamental point of view, gold should benefit from higher inflation. But why? In theory, there are several channels by which inflation supports the yellow metal. First, the inflationary increase in the money supply makes all goods and services more expensive, including gold. Indeed, the scientific paper by Lucey and others finds a reliable long-run relationship between gold and the US money supply.Second, gold is a real, tangible and rare good with limited supply that cannot be increased quickly or at will. These features make gold a key element during the so-called flight into real values or into hard assets, which happens when inflation gets out of control. In other words, gold is the ultimate store of value which proved to hold its worth over time , unlike paper currencies that are subject to inflation and lose their value systematically.Third, inflation means the loss of purchasing power of the currency, so when the greenback depreciates quicker than its major peers, the dollar-denominated price of gold increases. Fourth, when inflation is unexpected or when the Fed remains behind the curve and doesn’t hike nominal interest rates , real interest rates decline, supporting gold prices.Fifth, high inflation increases economic uncertainty, which increases safe-haven demand for gold . In other words, an outbreak of inflation introduces some turbulences and leads to portfolio rebalancing, thus increasing gold’s appeal as a portfolio diversifier . During inflation, bonds underperform, so gold’s attractiveness increases.And last but definitely not least, gold is perceived as an inflation hedge . But is it really a good hedge against inflation? I analyzed this issue a few years ago – it would be nice to provide an update in light of more recent developments. So, let’s take a look at the chart below, which shows gold prices and CPI annual inflation rates.As one can see, the relationship between these two series is far from being perfect. Actually, the correlation coefficient is significantly below zero (-0.41), which means that the correlation is negative ! It means that although there are certain long-term trends – for example, gold rallied during stagflation in the 1970s and entered a bear market during the disinflation period in the 1980s and 1990s – there is no positive relationship between the CPI annual percentage change and the price of gold on a monthly basis.In other words, the data shows that gold may serve as an inflation hedge only in the long run , as gold indeed preserves its value over a long time (for example, in the period from 1895 to 1999, the real price of gold increased on average by 0.3% per year). It is a good choice for investors also when there is relatively high and accelerating inflation, usually accompanied by fears about the current state of the U.S. dollar and a lack of confidence in the Fed and the global monetary system based on fiat monies .However, let’s not draw conclusions too hastily. The chart below also presents the CPI and gold – but this time both series are year-on-year percentage changes (previously we had gold prices, now we have annual percentage changes in these prices).Have you noticed something? Yup, this time both series behave much more similarly . Indeed, the correlation coefficient is now positive (0.44). Hence, there is a positive relationship between gold and inflation although not always seen in absolute prices (but in changes in these prices), and not always seen in the CPI (as inflation has broader effects not limited only to consumer prices).Summing up the above analysis, it seems justified to claim that gold could benefit from the current elevated levels of inflation, especially if it turns out to be more lasting than commonly believed. It will also be good for gold if the Fed remains dovish and tolerant of inflation surpassing its target significantly.Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Inflation Bets – Squaring or Not

Inflation Bets – Squaring or Not

Monica Kingsley Monica Kingsley 11.06.2021 17:20
S&P 500 shook off another record making inflation reading, and bond markets couldn‘t be happier. Volatility is back down, but the option traders turned cautious – that‘s fodder for the next upswing eventually. Many signs are pointing towards it – emerging markets rising with the dollar on the defensive, for example. Yes, the dollar with yields are key to watch now.S&P 500 was led higher by Nasdaq, which more than welcomed further retreat in yields. The tech led rally is here, and value while not down and out, is taking a breather. Especially financials don‘t like the move in yields, and we aren‘t at the 1.40% mark on 10-year Treasury bond yet. The summer lull in bonds is here, and my views on inflation getting permanently elevated, Fed‘s taper plays, bond yields retreat, inflation rearing its ugly head later this year before a growth scare strikes, can be found in the Latest Highlights and this week‘s articles amply discussed.So, stocks don‘t look like retreating, as the bond market momentum doesn‘t favor much downside, and tech would likely overpower that.Let‘s briefly check the reactions of other markets to yesterday‘s well telegraphed CPI springboard theme in stocks and precious metals.Gold moves better be viewed through the leading miners – these recovered from their prior underperformance. The yellow metal‘s swings best be viewed now through the optics of how much inflation is perceived as burning, declining TIP:TLT ratio notwithstanding. And the premarket moves throughout commodities mean that the marketplace isn‘t convinced about the Fed‘s seriousness in tackling inflation, justifying my earlier deep skepticism on the taper smoke and mirrors games.Crude oil chart is about decreasing upside momentum, and rising volume smacking of distribution as the lower knots show. I‘m looking for relatively shallow drop maximunm, and a correction in time rather than in price.Bitcoin is still challenging the declining resistance line connecting May and Jun rebound highs, and Ethereum isn‘t confirming Bitcoin‘s strength. The bears have an opportunity to strike, weekend including.Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq OutlookS&P 500 upswing was clearly driven by the Nasdaq surge, which is a defensive reaction to retreating yields taking their toll on high beta plays.Credit MarketsHigh yield corporate bonds have underperformed on the day, but the picture doesn‘t uproot the risk-on trades in the least.Technology and ValueTechnology including $NYFANG was again in the driver‘s seat as value just can‘t take to the sharply retreating yields.Gold, Silver and MinersMiners rising is the most important feature, with gold reliably refusing its premarket decline coming in as second. Look for passing the baton between gold and silver alongside the inflationary winds affecting commodities.Silver isn‘t visibly outperforming, and the copper to 10-year yield ratio is increasingly putting a firm floor below precious metals declines.Crude OilCrude oil is hanging in the balance, but a sharp correction isn‘t favored.SummaryS&P 500 remains well positioned to survive and thrive in the inflation fears as it‘s too early these take a toll on P&L or bring about doubts about economic growth.Gold and silver are well positioned to reap the benefits of higher inflation and lower real rates, and the miners keep confirming.While ripe for a breather, crude oil would probably trade in tandem with other commodity inflation trades, so look for shallow pullbacks only.Bitcoin and Ethereum are stuck at the moment, and break higher above resistance or its rejection, would reveal the next short-term direction.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
Why Inflation Trades Have Further to Run

Why Inflation Trades Have Further to Run

Monica Kingsley Monica Kingsley 14.06.2021 16:04
S&P 500 ran out of steam shortly after Friday‘s open, yet caught fire before the close. The sectoral disbalance driven by retreating yields went on, and tech remains still the engine of stock market growth – but look for the leadership to broaden into financials, industrials or energy as we go forward. Volatility made a new 2021 low while the put/call ratio has sharply risen to more neutral readings. Paring the bets is getting underway before this week‘s FOMC – the Fed is perceived to perhaps want to at least start debating taper, if not present the sketch of its seriously watered down shape. They‘ll make taper hints and noises at most, it would be much ado about nothing – the markets are just getting spooked now, most notably the dollar (having risen on the unreasonable expectation something palpable and material would come out of that – but remember, talk is cheap, and Jackson Hole is the more likely venue and time that would happen, with 2022 most probably being the year of taper).Another example of undue anticipatory reaction is Friday‘s gold weakness, in all likelihood to Thursday‘s Macron push to make G7 sell their gold to bail out Africa. Gold market appears taking it seriously, which wouldn‘t benefit the G7 populations during these times of still uneasy monetary activism left and right.Back to stocks – the 500-strong index increase was defensive in nature, with tech delivering the lion‘s share. Value is sputtering during the yields reprieve that I see lasting through the summer. Autumn, that would be another cup of tea – apart from the unyielding $CRB index, rising oil prices affecting sectors beyond transportation, and the job market heating up (hiring difficulties), the serene period in Treasuries would be over. Yes, that means I think the bond markets have it wrong with their sudden appreciation, and that equities and commodities are right not to tumble.Deflationary episode or a noticeably disinflationary one isn‘t in our future – the disconnect between inflation expectations expressed as TIP:TLT and RINF, is growing. Just as the experience on the ground. Even if we take a look at 2-year basis (May / Apr 2019 as a starting period to take out "low base argument“), we get per annum CPI for May 2021 at 2.55% and Apr 2021 at 2.23%. Hardly a deceleration, but a continuously building up inflation momentum when prior months are equally robustly examined.Inventories are down across many sectors beyond autos, and need to be replenished as economic activity isn‘t going down and parts of the world are reopening. That would help put upside pressure upon prices, even to the point of inflation surprise spikes – economic activity isn‘t moving down, and the inventory buildup would spill over into 2022.When I stated on Tuesday that inflation would be sold as being for our own good, it indeed is – remember that both the Fed and Treasury want higher inflation. One more sign to put the transitory argument at bay, and one more nail in the dollar‘s coffin. As if the heavy spending wasn‘t breaking the camel‘s back already – and no, the $6T boondoggle reshaping and adjourning doesn‘t count as making a difference.Gold is getting inordinarily spooked while neither miners nor silver nor commodities would call for that – Macron effect and taper fears in play. When I look at the key ratios, including copper to 10-year yield, the yellow metal‘s weakness is unjustified, especially as relates to silver. Keeping in mind the big picture, it‘s when the Fed moves, or declines to move as per market perceptions, that precious metals would benefit. The current on guard position in case they did the right thing and fought inflation, is misplaced. At the same time though, the miners to gold ratio had a third consecutive week of retreating – quite a consolidation waiting to be reversed.Crude oil knows no respite, and doesn‘t mind rising in spite of weaker oil index or XLE, the energy ETF. Part of its allure apart from the supply situation comes from the real assets drive, the unyielding $CRB index, and the rising economic activity. Corrections remain to be bought, and $68 remains a memory.Bitcoin has broken above the declining resistance line connecting May and Jun rebound highs, but Ethereum isn‘t thus far mirroring its relative strength. Both cryptos remain rather choppy, and the Saturday down, Sunday up trading shows that.On a different note, tomorrow there will be no regular analysis, only brief updates should the market conditions including retail sales data require that. I need to set aside serious time and give color to the important and beneficial negotiations about the future. Thank you for your support and understanding – I hope that one day would be enough. I have thus prepared a longer piece for today, and will be back in time well before the Fed with the regular daily report on Wednesday.Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq OutlookS&P 500 upswing was once again clearly driven by the Nasdaq surge, which didn‘t look at the daily pause in yields.Credit MarketsHigh yield corporate bonds have wavered, but given the rest of the credit markets‘ performance, the HYG close wasn‘t all too weak.Technology and ValueSelect technology segments apart from $NYFANG continued rising better than the heavyweights or merely pausing value stocks.Gold, Silver and MinersMiners declined, but refused to lead gold to the downside. The yellow metal‘s decline is most probably the Macron effect and Fed fears result as the move in either real or nominal rates doesn‘t justify that in the least. But again, I think this Treasury rise would ultimately fail, and rates would be back to rising.Silver outperformance isn‘t stark as regards commodities, and the copper to 10-year yield ratio isn‘t flashing warning signs for the white metal. Once the uncertainty in the king of metals is removed (needless to say, no new flush of supply through the open market a la central bank sales decades ago, is what the gold market would welcome the most), the current consolidation can be resolved through another upswing.Bitcoin and EthereumA little mixed picture in cryptos where Bitcoin relative strength isn‘t confirmed by Ethereum‘s moves. The bulls haven‘t entirely reasserted themselves.SummaryS&P 500 remains well positioned to push higher unless value stocks panic over retreating yields again or to a greater degree than before. Nasdaq upside momentum is strong enough to cushion stock market downside at the moment, and credit markets aren‘t in a risk-off mode.My Wednesday‘s words about gold being more vulnerable than silver to a scared dump, came true – only the catalyst was different. Miners weren‘t spooked to such a degree on Friday though, meaning the gold storm might not be as serious as the mounting fears indicate.While ripe for a breather, crude oil once again didn‘t take one, but the oil index weakness (sideways consolidation) warrants short-term caution – the oil outlook though remains bullish.Bitcoin moves aren‘t yet mirrored at least equally strongly in Ethereum. While encourating gains, the bulls can‘t celebrate just yet.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
The ETF You Want for Sunny and (Potentially) Cloudy Days

The ETF You Want for Sunny and (Potentially) Cloudy Days

Finance Press Release Finance Press Release 15.06.2021 08:23
Are you getting frustrated waiting for a meaningful pullback in US equity ETFs? There have been pullbacks in some sectors if you know where to look.If you like to buy on pullbacks in bull markets (like me), you may have trouble swallowing some of the price levels and medium-term overbought technicals on many instruments right now.Digging deeper into the trenches, some areas have had meaningful pullbacks, and we are going to get into one ETF right now that is currently trading at/near key technical levels.Figure 1 - Invesco Solar ETF (TAN) August 21, 2020 - June 14, 2021, Daily Candles Source stockcharts.comI like to find bullish short to medium-term technicals, and the Invesco Solar ETF (TAN) just closed over its 50-day moving average yesterday. This technical action comes after a period of retracement and consolidation that dates back to the beginning of 2021. Its 52-week high close is $121.94, put in back on February 9, 2021.The TAN ETF strategy and top holdings can be viewed here .So, while everyone is still talking about inflation and the upcoming Fed decision, we can focus our attention on an ETF that has pulled back nicely over a four + month time period and is exhibiting some signs of bullish technical strength. Also, take note of the RSI above 50 (57) and the MACD poised to cross the zero line.We can see that June 14th's candle was a gap higher and a close above the 50-day moving average. More clarity can be obtained by viewing an intraday 15-minute chart:Figure 2 - Invesco Solar ETF (TAN) June 10, 2021 - June 14, 2021, 15 Minute Candles Source stooq.comThe gap-up volume and TAN ’s ability to stay above and close above its 50-day moving average could be a bullish signal.US Administration and Solar OutlookJust like some of the other markets that I am currently following, TAN seems to make sense given the current US administration and democratic congressional majority. In fact, just as I am writing this, Reuters published an article about first-quarter US solar installations soaring . I do wish that this article would come out later instead, but it is out now.Although there are some supply chain concerns in solar right now (think commodities), there ought to be many initiatives and subsidies put forth by the Biden administration in the coming years. Regardless of your personal opinion on solar vs. fossil fuels, the idea is to try to profit from economic conditions. TAN could be a great addition to holdings to get exposure from a sector that has already experienced a meaningful pullback; brought on partially by the buy the rumor, sell the fact type of trading action that we saw in TAN from November 2020 (US presidential election) and January 2021 (inauguration).Based on the technicals that we have covered above and the pullback/consolidation that we have seen in the medium-term in TAN , this seems like a potentially solid entry point area.For additional details on the US Solar Market, the SEIA (Solar Energy Industries Association) just released their Q2 2021 report. You can view it here . It contains numerous datasets, charts, and other data, including projected residential and commercial installation projections.Figure 3 - Invesco Solar ETF (TAN) April 14, 2008 - June 14, 2021, Weekly Candles Source stockcharts.comLet’s also take note that TAN has traded at these levels before. It traded north of $220 back in the Summer of 2008. Hint, hint: there was $4 per gallon retail gasoline in the US at that time. I think it is wise to know the long-term trading history of instruments that are covered.What could TAN do if additional solar subsidies are issued by the Biden administration and residential + commercial installations increase? Time will tell.Now, for our premium subscribers, let's look to pinpoint potential entry levels in TAN , and recap the eight other markets that we are covering. Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter - it's absolutely free and if you don't like it, you can unsubscribe with just 2 clicks. If you sign up today, you'll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Rafael Zorabedian Stock Trading StrategistSunshine Profits: Effective Investment through Diligence & Care* * * * *This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. 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16 June 2021

16 June 2021

Stock market news Stock market news 16.06.2021 11:16
SAVILLS REVEALS THE CITIES THAT MAY MIGRATE FASTER TO HYBRID WORKINGSavills has examined both employee-driven and occupier/employer-driven factors to assess which global cities may see a faster transition to hybrid working post Covid-19. From an office occupier perspective, New York, Paris, London, Berlin and Frankfurt may be primed for a faster transition to hybrid working, given comparatively high office costs, already flexible working practices and extended lockdowns, while less flexible working cultures in Mumbai, Shanghai and Ho Chi Minh City mean that any transition to hybrid working may be slower.As part of its 2021 global Impacts research programme, the international real estate advisor looked at metrics such as the size of people’s homes, broadband speeds and commute times, alongside employer/occupier-focused factors, such as the cost and efficiency of offices, workplace culture, and lease lengths to grade cities on their possible speed of migration to hybrid working. Large homes and long commutes make Los Angeles, for instance, ripe for hybrid working from an employee perspective, says Savills, though comparatively low office costs, long leases and a diversified economic base mean employer incentives to cut space may be lower than in some other cities. Smaller cities such as Lyon and Amsterdam, meanwhile, are likely to see a slower shift to hybrid working, given shorter commutes for employees and lower costs to office occupiers.Jeremy Bates, Head of EMEA Occupier Services at Savills, comments: “Transition to a hybrid workforce is the biggest challenge businesses are going to face in the next five years. Even if you’re in a city set to switch more slowly it’s likely going to be something you’ll have to manage, and given low office availability in many locations, it’s better to start looking sooner rather than later to find space that will work for you in a hybrid model. With more collaborative space and increased room per employee likely, even if you have fewer people in the office you’re likely to still need a similar quantum. But this space will need to deliver efficient hybrid working, which involves designing a balanced physical-digital ecosystem that effectively bridges the gap between remote and office-based workers in terms of experience, accessibility and reliability.”Savills Hybrid Working Index: Employee-driven factorsSource: Savills World ResearchPaul Tostevin, director, Savills World Research, adds: “Locations such as Paris, London, Berlin, Frankfurt and New York which have higher office rents and relatively flexible working practices could see firms examining a hybrid working strategy more rapidly than other cities. But this may be outweighed by longer lease lengths, slower home broadband speeds and – in some cases – smaller homes, which may mean employees themselves push for a return to the office. As Asian cities experienced much shorter lockdowns and some – notably in China – returned straight to full-time office working, most will be slowest to transition to hybrid working. Small dwelling sizes mean that employees also support working from the office.”Savills Hybrid Working Index: Employer-driven factors – Source: Savills World ResearchAccording to the report, Warsaw, the largest office market in Poland, positions roughly in the middle of the ranking. Factors which favours companies’ faster transition to the hybrid model include the length of standard lease terms and a certain degree of flexibility that was slowly implemented by companies even before the pandemic. On the other hand, factors that are slowing the transition process are internet speed in some locations and rental level, which is still competitive with Western Europe and creates conditions for all employees to be provided with physical/traditional workplace in the office. Jarosław Pilch, Head of Tenant Representation, office Agency, Savills Poland, says: “Remote work, especially in the home edition, is associated with a numerous challenges. Many people, when arranging their homes, did not arrange a place to work, especially one that is suitable for working in full-time for a long time. The introduction of a hybrid work model is a process whose pace will vary depending on country and the specificity of the industry in which a given company operates. Many employers in Poland have not yet decided how they want their work model to look like after the pandemic. The reasons for that, among others are the ongoing analysis of the expectations and experiences of employees, wating for the changes in the labour law, or the time needed for observations of the real estate market and exploring new opportunities that market currently creates for tenants.”-Ends -Notes to Editors: Impacts is Savills global thought leadership publication and research programme. This year, Impacts is centered around the theme of “Evolve”: Covid-19 led to many changes in how we use and view real estate, but many sectors were already evolving significantly in response to ongoing market, technological, social and environmental trends. Impacts 2021 puts these changes in historic context to consider what comes next. For further information, please contact: Paul Tostevin, Savills World Research Tel: +44 (0) 20 7016 3883Natalie Moorse, Savills UK press office Tel: +44 (0) 20 7075 2827Jan Zaworski, Savills Poland press office Tel: +48 666 363 302Founded in the UK in 1855, Savills is one of the world's leading property agents with 600 offices across the Americas, Europe, Asia Pacific, Africa and the Middle East offering a broad range of specialist advisory, management and transactional services.Should you not wish to receive Savills press releases, please email us at: kontakt.rodo@savills.pl. Click here for our Privacy Policy.
Inflation Tipping Point

Inflation Tipping Point

Monica Kingsley Monica Kingsley 16.06.2021 15:45
S&P 500 hasn‘t extended Monday‘s gains, continuing to trade in a cautious, tight range. Not that it would be driven by Treasury yields that much on a daily basis – the tech breather was one day delayed, but still didn‘t erase Monday‘s gains in full. Yes, Nasdaq didn‘t reverse, and I‘m looking for it to reassert its strength in spite of having approached the rising resistance line connecting the Feb and Apr highs.Sure, a little rotation later today wouldn‘t be unimaginable as I am looking for the Fed to largely bypass bringing up taper, which would mean continued ostrich pose when faced with rising inflation (did you see yesterday‘s PPI beating expectations? Another confirmation of my Monday‘s points of inflation being baked in the cake, and in spite of all the transitory rhetoric, working its way through the system as reliably as water through Titanic‘s compartments. The coming Fed disappointment in doing the right thing (fighting inflation even as late as it is now before the expectations become obviously unanchored, eventually turning velocity of money around).Let‘s check my Monday‘s assumptions and where we stand in the run up to today‘s FOMC:(…) Paring the bets is getting underway before this week‘s FOMC – the Fed is perceived to perhaps want to at least start debating taper, if not present the sketch of its seriously watered down shape. They‘ll make taper hints and noises at most, it would be much ado about nothing – the markets are just getting spooked now, most notably the dollar (having risen on the unreasonable expectation something palpable and material would come out of that – but remember, talk is cheap, and Jackson Hole is the more likely venue and time that would happen, with 2022 most probably being the year of taper).The yields reprieve … I see lasting through the summer. Autumn, that would be another cup of tea – apart from the unyielding $CRB index, rising oil prices affecting sectors beyond transportation, and the job market heating up (hiring difficulties), the serene period in Treasuries would be over. Yes, that means I think the bond markets have it wrong with their sudden appreciation, and that equities and commodities are right not to tumble.Deflationary episode or a noticeably disinflationary one isn‘t in our future – the disconnect between inflationary expectations expressed as TIP:TLT and RINF, is growing. Just as the experience on the ground. Even if we take a look at 2-year basis (May / Apr 2019 as a starting period to take out "low base argument“), we get per annum CPI for May 2021 at 2.55% and Apr 2021 at 2.23%. Hardly a deceleration, but a continuously building up inflation momentum when prior months are equally robustly examined.Inventories are down across many sectors beyond autos, and need to be replenished as economic activity isn‘t going down and parts of the world are reopening. That would help put upside pressure upon prices, even to the point of inflation surprise spikes – economic activity isn‘t moving down, and the inventory buildup would spill over into 2022.When I stated on [prior] Tuesday that inflation would be sold as being for our own good, it indeed is – remember that both the Fed and Treasury want higher inflation.So, the S&P 500 won‘t be broken by today‘s Fed moves, and tech would withstand the move in yields. The sectoral leadership would broaden to include e.g. financials, industrials and energy as the cyclical trades are far from over. Volatility has risen a little over these tow days, and option traders are raising their guard again, but today‘s FOMC would largely turn out to be a non-event – in stocks.The dollar would get frightened, but the 2021 lows have held in May, and are holding up in June. Unless they break (I‘m not looking for that to happen this month), the greenback is likely rangebound for now. It would be during autumn when both the continuous rise in inflation and the European recovery getting more broadly recognized and established, would start biting the world reserve currency more again.Gold has inordinarily suffered through the taper fears, and silver remains the stronger metal. Obviously, as I am not looking for the inflation trades to roll over – quite to the contrary, I expect them to grow in strength, which extends to yesterday‘s bloodbath in copper too. Just like I called for springboard price action before the CPI release on Thursday, I am calling for gold to welcome the Fed‘s inaction, leading to break through the $1,900 mark. Probably not today, but tomorrow‘s action should be pretty bullish – you know what they say about the first moves on key event days, being the false ones…Anyway, inflation expectations seem to be getting it right again, in rising back above the April lows. The copper to 10-year yield ratio has been beaten down badly, and both fundamentals and technicals are arrayed behind the red metal, which would positively reflect upon silver too. And miners, they‘re likely to get their act together alongside gold.Crude oil remains the reliable commodity star, refusing to yield much ground at all. And since the oil index confirms its yesterday‘s strength, buying the dips in expectation of more gains, is the way to go.Bitcoin closed for a second day above the declining resistance line connecting May and Jun rebound highs, peeking above 41,000. Its current move to 39,000 represents an opportunity to join in on the long side, as both the daily and weekly chart look incresingly bullish, in accumulation. Ethereum is lagging a little at the moment, but the base ushering return of its outperformance, is getting long in the tooth. I see that not animal spirits of an outrageously bullish variant, but bullish spirits climbing the wall of worry, are returning to the crypto space.That was yet another long daily analysis, which won‘t likely need much updating post the Fed. Some throw off moves in the opposite direction of the real move, are to be expected, and barring a needed change in open positions, I will be covering the very short-term reactions and takeaways on Twitter. It means that in all likelihood tomorrow, and surely on Friday, there will be no regular analysis, only brief updates should changed market conditions require that. The unfolding important and beneficial negotiations about the future require that. Thank you for your support and understanding – Monday 21st marks the return to usual programming during the next week.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 downswing was led by Nasdaq yesterday, but is nothing more than a daily fluctuation – gains for the 500-strong index are probably nearer than they are for tech, but it‘s a question of relatively short time for both to rise in tandem once again.Credit MarketsHigh yield corporate bonds went through a little correction but overall, the corporate credit markets are standing on firmer ground than the long-dated Treasuries.Technology and ValueTechnology was weighed down by $NYFANG as value continued its shallow basing. That‘s a picture of daily caution overall, as high beta plays surely aren‘t dumped en masse. As a sidenote, the Russell 2000 continues holding up well, and that‘s constructive.Gold, Silver and MinersMiners are more resilient in their decline than gold, which increases odds of a sharp turnaround in the yellow metal next.Silver has been and is likely to outperform gold, and the washout in the copper to 10-year yield ratio highlights the excessive nature of both moves – I‘m looking for copper to rebound, which would have greater effect upon silver than gold.Crude OilCrude oil offers one long, drawn out upswing with precious few and less than shallow interruptions. It seems that only a serious short-term blow to (hesitation in) the bullish commodities trade, reopenings and economic activity rising environment, would make black gold decline somewhat.SummaryS&P 500 remains well positioned to shake off the inflation worries over the Fed doing nothing. Inflation isn‘t yet strong enough to dent P&Ls, and brighter days for both the 500-strong index and Nasdaq, are ahead.Gold is likely to recover strongly today, but would be outperformed by silver – reliably. Miners won‘t stand aside as the yellow metal takes on $1,900 again.The breather in crude oil is looking once again to be deferred. Pullback are to be bought (the oil index confirms), and the oil outlook remains bullish.Bitcoin and Ethereum are in accumulation mode and the bears look to have run out of time – look for today‘s downswing to be decisively invalidated over the coming week.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
Gold Asks: Will the Economic Boom Continue?

Gold Asks: Will the Economic Boom Continue?

Finance Press Release Finance Press Release 17.06.2021 15:59
The US GDP has already recovered from the pandemic recession. What’s next for the economy and the gold market?Ladies and Gentlemen, the economic crisis has ended. Actually, not only is the recession over but so is the recovery! This is at least what the recent GDP readings are indicating. As the chart below shows, the US nominal GDP has already jumped above the pre-pandemic level . The real GDP, which takes inflation into account, remained in the first quarter of 2021 below the size of the economy seen at the end of 2019, but it will likely surpass this level in the second quarter of the year.As one can see in the chart below, in terms of GDP growth, the situation is a bit worse, as the annual percentage changes are still below the pre-epidemic level . However, this should change in the second quarter of 2021 when the growth pace is likely to peak amid base effect and reopening of the economy.So, the question is: what’s next? Will the economic boom become well-established or will we see a lot of volatility or even new slumps? Given the recent flux of disappointing high-frequency indicators that fell considerably short of expectations (just think about April’s nonfarm payrolls ), the question is very relevant.Well, there are many threats to growth , that’s for sure. The first is, of course, the ever-evolving coronavirus and its new variants. However, judging by preliminary evidence, the vaccines should remain effective, allowing economies to function freely.The second obvious danger is clearly the economy overheating and higher inflation . The Fed and the Congress injected a lot of liquidity into the economy although it would recover if it was left to its own devices thanks to the rollout of vaccinations and easing lockdowns. So, much of government funds arrived just when the economy practically recovered, which is a recipe for higher prices and inflation-related turbulences in the financial markets.Third, the increase in debt – both private and public – makes the global economy more fragile. Given the level of indebtedness, even small increases in real interest rates would be dangerous. They would increase the costs of servicing debts for the governments and could hit the asset prices. The fact that the Fed will be under great pressure to remain very dovish is, of course, positive for gold prices . Even if we see some effort to normalize the monetary policy , interest rates and the Fed’s balance sheet will never return to the pre-recession levels.Last but not least, there is a threat of financial crisis . Many people are worried that there is a bubble in the stock market (and in other markets as well, such as the cryptocurrency market). Indeed, the equities have been reaching new peaks and the valuations are elevated. The margin debt has also jumped. Not surprisingly, the relative frequency of Google searches for the “stock market bubble” has recently risen (just as for the word “inflation”).Even the Fed in its latest Financial Stability Report expressed some concerns. This is what the Fed Governor Lael Brainard said in a statement linked to the report :Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year. Equity indices are setting new highs, equity prices relative to forecasts of earnings are near the top of their historical distribution, and the appetite for risk has increased broadly, as the "meme stock" episode demonstrated. Corporate bond markets are also seeing elevated risk appetite, and the spreads of lower quality speculative-grade bonds relative to Treasury yields are among the tightest we have seen historically. The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.To sum up, the US economy has already recovered from the coronavirus recession, which is bad for safe-haven assets such as gold , as the yellow metal doesn’t like economic expansions. However, there are important threats to sustainable economic growth, which should support the price of gold.Actually, there is still room for gold to rally further . This is because we are in an inflationary phase of the economic expansion (this boom will be more inflationary than the post- Great Recession period), and all the money created during the pandemic has flowed into the asset markets, pushing their prices into elevated levels not necessarily justified by fundamentals (just think about Dogecoin). Gold could benefit from such a bubble, as well as from an inflationary and hot environment. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter . Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care.
Gold: The Fed Wreaked Havoc on the Precious Metals

Gold: The Fed Wreaked Havoc on the Precious Metals

Finance Press Release Finance Press Release 18.06.2021 17:02
Gold declined yesterday, or I should say, it rushed down at breakneck speed. And while it might have been a surprise for some, it wasn’t for me.However, we should stay alert to any possible changes, as no market moves in a straight line. Tread carefully.On a side note, while I didn’t check it myself (well, it’s impossible to read every article out there), based on the correspondence I’m receiving, it appears I’ve been the only one of the more popular authors to be actually bearish on gold before the start of this week. Please keep that in mind, along with me saying that yesterday’s decline is just the beginning, even though a short-term correction might start soon. Having that in mind, let’s discuss what the Fed did (and what it didn’t do) in greater detail.Look What You DidWith the U.S. Federal Reserve’s (FED) reverse-repo nightmare frightening the liquidity out of the system, I highlighted on Jun. 17 that the FED raised the interest rate on excess reserves (IOER) from 0.10% to 0.15%.I wrote:The FED hopes that by offering a higher interest rate that it will deter counterparties from participating in the reverse repo transactions. However, whether it will or whether it won’t is not important. The headline is that the FED is draining liquidity from the system and increasing the IOER is another sign that the U.S. federal funds rate could soon seek higher ground.Please see below:To explain, the red line above tracks the U.S. federal funds rate, while the green line above tracks the IOER. If you analyze the behavior, you can see that the two have a rather close connection. And while we don’t expect the FED to raise interest rates anytime soon, officials’ words, actions and the macroeconomic data signal that the taper is likely coming in September.And in an ironic twist, while the question of whether it will or whether it won’t seemed reasonable at the time, the tsunami of reverse repurchase agreements on Jun. 17 signal that 0.15% just isn’t going to cut it. Case in point: while the FED hoped that the five-basis-point olive branch would calm institutions’ nerves, a record $756 billion in excess liquidly was shipped to the FED on Jun. 17 . For context, it was nearly $235 billion more than the daily amount recorded on Jun. 16.Please see below:To explain the significance, I wrote previously:A reverse repurchase agreement (repo) occurs when an institution offloads cash to the FED in exchange for a Treasury security (on an overnight or short-term basis). And with U.S. financial institutions currently flooded with excess liquidity, they’re shipping cash to the FED at an alarming rate.The green line above tracks the daily reverse repo transactions executed by the FED, while the red line above tracks the U.S. federal funds rate. Moreover, notice what happened the last time reverse repos moved above 400 billion? If you focus your attention on the red line, you can see that after the $400 billion level was breached in December 2015, the FED’s rate-hike cycle began. Thus, with current inflation dwarfing 2015 levels and U.S. banks practically throwing cash at the FED, is this time really different?Furthermore, I noted on Jun. 17 that the FED’s latest ‘dot plot’ was a hawkish shift that market participants were not expecting.I wrote:The perceived probability of a rate hike by the end of 2022 sunk to a 2021 low on Jun. 12. However, after the FED’s material about-face on Jun. 16, I’m sure these positions have been recalibrated.Please see below:And as if the chart above had been inverted, the perceived probability of a rate hike by the end of 2022 has now surged to more than 90%.The Death Toll of June 17thIn addition, while I’ve been warning for months that the bond market’s fury would eventually upend the PMs, not only has the FED’s inflationary misstep rattled the financial markets, but the U.S. 30-year fixed-rate mortgage (FRM) jumped to 3.25% on Jun. 17.Please see below: Source: Mortgage News DailyFurthermore, please read what Matthew Graham, COO of Mortgage News Daily, had to say:“Markets were somewhat surprised by the Fed's rate hike outlook. Granted, the Fed Funds Rate (the thing the Fed would actually be hiking) doesn't control mortgage rates, but the outlook speaks to how quickly the Fed would need to dial back its bond buying programs (aka "tapering"). Those programs definitely help keep rates low. The sooner the Fed begins tapering, the sooner mortgage rates will see some upward pressure .”To that point, with tapering prophecies officially morphing from the minority into the consensus, the PMs weren’t the only commodities sent to slaughter on Jun. 17. For example, the S&P Goldman Sachs Commodity Index (S&P GSCI) plunged by 2.37% as the inflationary unwind spread. For context, the S&P GSCI contains 24 commodities from all sectors: six energy products, five industrial metals, eight agricultural products, three livestock products and two precious metals.Exacerbating the selling pressure, China’s National Food and Strategic Reserves Administration announced on Jun. 17 that it would release its copper, aluminum and zinc supplies “in the near future” in a bid to contain the inflationary surge that’s plaguing the region. As a result, if the psychological forces that led to the surge in cost-push inflation come undone, the USD Index could move from the outhouse to the penthouse.To explain, I wrote on Apr. 27:Why is the behavior of the S&P GSCI so important? Well, if you analyze the chart below, you can see that the S&P GSCI’s pain is often the USD Index’s gain.To explain, the red line above tracks the USD Index, while the green line above tracks the inverted S&P GSCI. For context, inverted means that the S&P GSCI’s scale is flipped upside down and that a rising green line represents a falling S&P GSCI, while a falling green line represents a rising S&P GSCI. More importantly, though, since 2010, it’s been a near splitting image.Inflation Is Still ThereIn the meantime, though, inflationary pressures are far from contained. And while the S&P GSCI’s plight would be a boon for the USD Index, the greenback still has plenty of other bullets in its chamber. Case in point: with the FED poised to taper in September and investors underpricing the relative outperformance of the U.S. economy, VANDA Research’s latest FX Outlook signals that over-optimism abroad could lead to a material re-rating over the summer.Please see below:To explain, the chart on the right depicts investors’ expectations of economic strength across various regions. If you analyze the second (CAD) and the third (GBP) bars from the right, you can see that positioning is more optimistic than the economic growth that’s likely to materialize. Conversely, if you analyze the first bar (USD) from the left, you can see that positioning is more pessimistic than the economic growth that’s likely to materialize. As a result, with U.S. GDP growth poised to outperform the U.K., Canada, and the Eurozone, an upward re-rating of the USD Index could intensify the PMs selling pressure over the medium term.On top of that, while the inflation story is far from over (and will pressure the FED to taper in September), the Philadelphia FED released its Manufacturing Business Outlook Survey on Jun. 17. And while manufacturing activity dipped in June, “the diffusion index for future general activity increased 17 points from its May reading, reaching 69.2, its highest level in nearly 30 years .”In addition, “the employment index increased 11 points, recovering its losses from last month,” and “the future employment index rose 2 points … [as] over 59 percent of the firms expect to increase employment in their manufacturing plants over the next six months, compared with only 5% that anticipates employment declines.” For context, employment is extremely important because a strengthening U.S. labor market will likely put the final nail in QE’s coffin.But saving the best for last:“The prices paid diffusion index rose for the second consecutive month, 4 points to 80.7, its highest reading since June 1979 . The percentage of firms reporting increases in input prices (82 percent) was higher than the percentage reporting decreases (1 percent). The current prices received index rose for the fourth consecutive month, moving up 9 points to 49.7, its highest reading since October 1980 .”Please see below: Source: Philadelphia FEDInvestment Clock Is TickingAlso, signaling that QE is living on borrowed time, Bank of America’s ‘Investment Clock’ is ticking toward a bear flattener in the second half of 2021. For context, the term implies that short-term interest rates will rise at a faster pace than long-term interest rates and result in a ‘flattening’ of the U.S. yield curve.Please see below:To explain, the circular reference above depicts the appropriate positioning during various stages of the economic cycle. If you focus your attention on the red box, you can see that BofA forecasts higher interest rates and lower earnings per share (EPS) for S&P 500 companies during the back half of the year.As further evidence, not only is the FED’s faucet likely to creak in the coming months, but fiscal stimulus may be nearing the dry season as well.Please see below:To explain, the blue bars above track the U.S. budget deficit as a percentage of the GDP. If you analyze the red circle on the right side of the chart, you can see that coronavirus-induced spending was only superseded by World War Two. Moreover, with the law of gravity implying that ‘what goes up must come down,’ the forthcoming infrastructure package could be investors’ final fiscal withdrawal.The Housing MarketLast but not least, while the S&P 500 has remained relatively upbeat in recent days, weakness in the U.S. housing market could shift the narrative over the medium term.Please see below:To explain, the red line above tracks the S&P 500, while the green line above tracks U.S. private building permits (released on Jun. 16). If you analyze the arrows, you can see that the former nearly always rolls over in advance of the latter . For context, the S&P 500 initially peaked before building permits in 2018 and alongside in 2015. However, in 2018, when the S&P 500 recovered and continued its ascent – while building permits did not – the U.S. equity benchmark suffered a roughly 20% drawdown. Thus, if you analyze the right side of the chart, you can see that building permits peaked in January and have declined significantly. And if history is any indication, the S&P 500 will eventually follow suit.In conclusion, the PMs imploded on Jun. 17, as taper trepidation and the USD Index’s sharp re-rating dropped the guillotine on the metals. And with the FED’s latest ‘dot plot’ akin to bullet holes in the PMs, the walking wounded is still far from a recovery. With inflation surging and the FED likely to become even more hawkish in the coming months, the cycle has materially shifted from the goldilocks environment that the metals once enjoyed. And with the two-day price action likely the opening act of a much larger play, the PMs could be waiting months for another round of applause.Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.Przemyslaw Radomski, CFA Founder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care* * * * *All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
FOMC Announced Two Rate Hikes in 2023. Gold Didn’t Like It!

FOMC Announced Two Rate Hikes in 2023. Gold Didn’t Like It!

Finance Press Release Finance Press Release 18.06.2021 17:47
The newest Fed’s statement and dot-plot indicated a much more hawkish tone among the FOMC members than the markets expected, and gold dropped.On Wednesday (June 16, 2021), the FOMC has published its newest statement on monetary policy . The statement was barely changed. The main alteration is that the Fed has ceased saying that “the pandemic is causing tremendous human and economic hardship across the United States and around the world”. Furthermore, with the CPI annual rate jumping to 5% in May, the US central bank acknowledged that inflation is not any longer “running persistently below this longer-run goal”. Hence, both modifications are slightly hawkish , as the Fed noticed an improvement in the epidemiological situation, as well as higher inflation. Bad news for gold.However, the statement was only slightly changed, so the investors focused more on the accompanying dot-plot and Powell’s press conference instead. According to the fresh economic projections , the Fed forecasts higher GDP growth and higher inflation this year, as the table below shows.As one can see, the FOMC expects that the GDP will soar 7% in 2021, compared to a 6.5% rise expected in March. They also assume that the pace of economic growth will be slightly higher in 2023. Meanwhile, the Fed officials believe now that the PCE inflation (core PCE) will jump to 3.4% (3%) this year , compared to 2.4% (2.2%) seen in March. They also forecast a slightly lower unemployment rate in 2022.But the most impactful change occurred in the expected path of the federal funds rate . The FOMC members now forecast that the US policy rate will be 0.6% at the end of 2023, an important upward change from 0.1% projected in March. In other words, the US central bankers believe that two interest rate hikes will be appropriate in 2023 . It means that they started to think about tapering, which is fundamentally negative for gold prices.Indeed, Powell said during his post-meeting press conference that we can “think of this meeting that we had as the talking about talking about meeting [at which the Fed will start tapering], if you like”.Implications for GoldWhat does the recent FOMC meeting imply for the gold market? Well, the Fed struck again. As a result, the price of gold plunged. As the chart below shows, the London P.M. Fix slid from about $1,865 on Tuesday to $1779 on Thursday.The reason is simple : the fresh dot-plot shows that a majority of the Fed officials currently forecasts two quarter-point rate hikes in 2023 . 13 of 18 FOMC members see some interest rate increases in 2023 compared to just 7 members in March. Moreover, 7 participants now predict some upward moves next year. These changes lifted market expectations of future interest rates . In consequence, the bond yields increased, which raised the opportunity costs of holding non-yielding bullion . Furthermore, the more hawkish stance of the Fed strengthened the US dollar, creating downward pressure on gold prices. In other words, the new economic outlook revealed some hawks among the FOMC members and that there might be less tolerance toward higher inflation than previously thought.However, the bullish case for gold is not over yet . After all, the Fed maintained its very accommodative monetary policy, and it will not hike interest rates this year and probably not also in 2022. Additionally, the dot-plot is not the official projection of the future path of the federal funds rate, so it should be taken with a grain of salt. A lot may happen by 2023. Also, the Fed leadership seems to be more dovish than many of the regional Fed presidents.Last of all, Powell repeated that inflation is merely transitory. But why hike interest rates if inflation is merely transitory and federal debt is ballooning? Hence, it might be the case that the Fed is testing the markets. High inflation is still with us, and it may be more lasting than the Fed believes. Even with two interest rate hikes, the real interest rates should stay negative.Having said that, the hawkish Fed’s statement and hawkish economic projections are fundamentally negative for the yellow metal in the medium term . The chances of a replay of 2013 have increased. It seems that gold may struggle without an inflationary turmoil, stagflation , the dovish counter-strike at the Fed, or a debt crisis .If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Greatest sale of Japanese stocks

Greatest sale of Japanese stocks

Kseniya Medik Kseniya Medik 21.06.2021 11:51
What happened?Nikkei 225 has sharply dropped after the hawkish surprise from the Federal Reserve. The central bank claimed it might raise interest rates in 2023 (or even in late 2022) and also started a discussion on cutting bond buys. Well, that decision pushed the USD dollar up and pressed some stocks down. Which ones? Stocks that were favored in reflation trade or, in other words, those that benefited from higher inflation: value and cyclical stocks. The worst performers of the last week were banks and cyclical-heavy Japanese stocks.The Japanese stock index Nikkei dropped by 4% – the most since April! It has a huge proportion of economically sensitive stocks, that’s why the hit was so hard. Uniqlo (Fast Retailing Co.), the clothing retailer, and the chip-equipment producer Tokyo Electron Ltd. dropped the most on the index. Besides, the slow vaccination pace in Japan and the dark outlook for the Tokyo Olympics pressed the stock index down as well. Still, the JP 225 is at the all-time highs. This drop may be just a healthy correction ahead of the further rally up.Let’s look at the chart!The JP 225 index is moving inside the descending channel. The long lower shadow of the last candle gives a bullish signal. The sentiment has started changing, and the stock index may rise to the 50-day moving average of 28,900. The breakout above this level will drive the pair to the last week’s high of 29,400. This resistance level won’t be broken on the first try as the stock index has failed to do that a few times. On the flip side, the move below the 200-day moving average of 27,500 will push JP 225 to the next round number of 27,000.Download the FBS Trader app to trade anytime anywhere! For personal computer or laptop, use MetaTrader 5!
Fed Didn‘t Tame Inflation

Fed Didn‘t Tame Inflation

Monica Kingsley Monica Kingsley 21.06.2021 16:45
As resilient as it had been before Wednesday, S&P 500 met selling pressure on Friday, including the best performing tech sector. Bullard‘s comments on the „inflation surprise“ and first rate hike before 2022 is over – are they full of hot air, testing the waters before taper, or serious intent? Given the ease with which precious metals and then select commodities such as copper or soybeans tumbled, rate hikes might appear to be baked in the cake now – but in reality, it‘s the unyielding inflation that would prove rather persistent than transitory.The Fed did the bare minimum, acknowledging inflation in passing, implying it would go away on its own. But it‘s more complicated than that – bank credit creation isn‘t strong, and had been declining before bond yields bottomed in Aug 2020. Are banks reluctant to lend, or customers to borrow? The result of production not ramping up as wildly as expected (reopening trades) is compounding the disturbed supply chains and commodity prices rising (cost-push inflation). Add to that job market pressures, and you have a recipe for inflation being more transitory than originally thought. In other words, cyclical and structural as import-export prices hint at too..Money in the system isn‘t flowing into production or capacities expansion – inventories have instead been drawn down, and need to be replenished. Just as I have written the prior Monday, that would be putting upside pressure on prices as much Europe awakening or hard hit countries such as India springing back. So, fresh money results in excess liquidity, trapped in the system, and flowing to bonds, which explains the Fed‘s need to act and fix repo rate at 0.05%. So much for the recent spike in Treassuries – this whiff of „almost deflation“ has it wrong, and yields will revert to rising – regardless of when exactly (or if) other parts of the intended $6T stimulus package get enacted.Sure, the Fed actions have shortened the (sideways) lull in Treasuries, made the dollar spike, but haven‘t changed the underlying dynamic of the free market not willing to pick up the slack in credit creation should the Fed indeed taper. Chances are, they would still taper, but later in 2022 – such was and still is my expectation, with bank credit creation being (hopefully) the key variable on their watch as a deciding factor. In the meantime, the inflation problem will get even more embedded – not a fast galloping inflation or hyperinflation, but a serious problem raising its ugly head increasingly more through the years to come.In short, the Fed played the dot plot perceptions game which amounts to no serious attempt to nip inflation in the bud. The markets (precious metals, commodities) got thrown off prior trends, but will see through the bluff that can‘t be followed by actions. The inflation trades (and by extension modest rise in yields as we drift towards 2.50% on the 10-year before that tapering actually starts, with positive consequences for financials and cyclicals) haven‘t been killed off, and will reassert themselves when the markets test the Fed (and they will). To be clear, I am calling for persistently elevated (not hyper) inflation (PCE deflator readings coming soon) with the 10-year yield reverting to its more usual trading range – so essential to financial repression reducing the real value of all obligations.Keep also the following macroeconomic point on your mind – inflation isn‘t strong enough currently to knock off the P&L to make stocks roll over, we‘re still in a reflation and commodities super bull market. Lower GDP growth potential equals growth (tech) doing fine, but expect the stock market leadership to broaden yet again to include the beaten down industrials and financials.So, there is no taper (wait for Jackson Hole), but we‘re enduring almost a taper tantrum, and stocks might need to test the 4,050 – 4,100 broad support zone that has more chances of holding than not. Doing so, it would confirm that value is far from down and out, and that we have further to run. As menacing as the VIX looks, the put/call ratio is already positioned on a rather cautious side, meaning that no great S&P 500 correction is starting here. It doesn‘t look so currently – the dislocation in credit markets (high yield end) appears temporary.Gold and silver are being hit by the hawkish Fed bets, and so are the inflation expectations. Miners are buying into it, meaning that the miners to gold ratio is threatening a downswing on the weekly chart. Has the true downtrend in the metals started? The yellow metal is actually sitting at two strong supports, and silver to gold ratio remains still in an uptrend. Simply put, the last 3 days trading action appears too exagerrated given the bond market disequilibrium amplifying the dollar upswing. Sure, it‘s a stiff headwind, but the Fed is still as easy as can be, and the copper to 10-year yield ratio remains constructive on the weekly chart, and starting to doubt the decline‘s veracity on the daily one.Oil is a great example of the commodities fever being far from over, and I‘m looking for more (basing) strength in black gold in spite of the oil index getting inordinarily spooked alongside many real assets. That‘s consistent with the persistent inflation not yielding much at all.Bitcoin and Ethereum also appear buying into the hawkish Fed narrative, when in reality money is still loose. But the dollar effect is in play in cryptos too – even if the dollar is range bound on high time frames, its current upswing hasn‘t fizzled out yet – the markets aren‘t yet near doubting the Fed.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 daily downswing still looks to be part of a correction, and no topping pattern. Nasdaq has held up relatively well, and I‘m expecting more strength in tech, followed gradually by value.Credit MarketsThe intraday reversal in high yield corporate bonds is what matters the most, and better be followed by local bottom forming here.Technology and ValueTechnology has been quite resilient, contrasting with the doom and gloom in value or more lag in smallcaps.Gold, Silver and MinersGold and miners are reacting as if tightening was already on, and real rates actually not declining. While the dollar link has been more influential, gold price action next would decide the fate of both technical factors mentioned in the caption. Another, stronger support line including 2019 lows, is below.Silver has been and is likely to outperform gold, and in hindsight, the current storm would be of the rea cup variety. While copper rebound isn‘t here yet, the ratio to 10-year yield indicates a reprieve.Bitcoin and EthereumNeither Bitcoin nor Ethereum chart is bullish, and the only argument not to boot, is the presence of two BTC supports.SummaryS&P 500 is approaching a deciding point in its still reflationary era. Value stabilizing in the face of rising tech and Treasuries would be the next bull market run objective.Gold and silver aren‘t out of the woods just yet but tentative signs of stabilization look to be here. Conquering the pre-FOMC levels, attacking $1,900 seems for now to be more than a few weeks away.Crude oil remains well positioned to extend gains as the commodity selloff on Thursday barely touched it. The oil outlook remains bullish.Bitcoin and Ethereum aren‘t on an immediate winning streak, and the recent closing lows in Bitcoin (below 33,000) remain to be monitored for a turn in sentiment. The weekly basing pattern though can‘t be ignored, making a break below 30,000 unlikely to succeed the earlier we were to move into the 35,000 – 40,000 range. That‘s a big if.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the four publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals and Bitcoin Trading Signals.
Gold & the USDX: Correlations

Calling the Fed‘s Bluff

Monica Kingsley Monica Kingsley 22.06.2021 15:51
S&P 500 risk-on trading yesterday confirmed that it would have indeed been too early to write off value stocks. Financials, energy sprang higher, accompanied by the as of late usual tech suspect – the heavyweights though merely defended gained ground. Coupled with the credit market perspectives, it was a clear risk-on day as evidenced by the VIX and put/call ratio. The markets have turned on a dime, ignoring the Fed messaging of prior week as shown in the surging CRB index, reversing dollar and Treasuries:(…) Given the ease with which precious metals and then select commodities such as copper or soybeans tumbled, rate hikes might appear to be baked in the cake now – but in reality, it‘s the unyielding inflation that would prove rather persistent than transitory.The Fed did the bare minimum, acknowledging inflation in passing, implying it would go away on its own. But it‘s more complicated than that – bank credit creation isn‘t strong, and had been declining before bond yields bottomed in Aug 2020. Are banks reluctant to lend, or customers to borrow? The result of production not ramping up as wildly as expected (reopening trades) is compounding the disturbed supply chains and commodity prices rising (cost-push inflation). Add to that job market pressures, and you have a recipe for inflation being more transitory than originally thought. In other words, cyclical and structural as import-export prices hint at too.Money in the system isn‘t flowing into production or capacities expansion – inventories have instead been drawn down, and need to be replenished. Just as I have written the prior Monday, that would be putting upside pressure on prices as much Europe awakening or hard hit countries such as India springing back. So, fresh money results in excess liquidity, trapped in the system, and flowing to bonds, which explains the Fed‘s need to act and fix repo rate at 0.05%. So much for the recent spike in Treassuries – this whiff of „almost deflation“ has it wrong, and yields will revert to rising – regardless of when exactly (or if) other parts of the intended $6T stimulus package get enacted.Sure, the Fed actions have shortened the (sideways) lull in Treasuries, made the dollar spike, but haven‘t changed the underlying dynamic of the free market not willing to pick up the slack in credit creation should the Fed indeed taper. Chances are, they would still taper, but later in 2022 – such was and still is my expectation, with bank credit creation being (hopefully) the key variable on their watch as a deciding factor. In the meantime, the inflation problem will get even more embedded – not a fast galloping inflation or hyperinflation, but a serious problem raising its ugly head increasingly more through the years to come.In short, the Fed played the dot plot perceptions game which amounts to no serious attempt to nip inflation in the bud. The markets (precious metals, commodities) got thrown off prior trends, but will see through the bluff that can‘t be followed by actions. The inflation trades (and by extension modest rise in yields as we drift towards 2.50% on the 10-year before that tapering actually starts, with positive consequences for financials and cyclicals) haven‘t been killed off, and will reassert themselves when the markets test the Fed (and they will). To be clear, I am calling for persistently elevated (not hyper) inflation (PCE deflator readings coming soon) with the 10-year yield reverting to its more usual trading range – so essential to financial repression reducing the real value of all obligations.For now, the dollar is supported by all the tightening messaging, and as extended as it had been on a daily basis after Friday‘s close, yesterday‘s reversal had a strong consolidation feel to it, meaning that the dollar upswing might not be over just yet. The same thing can‘t be said about Treasuries, which look set to go on an overall slowly but surely rising yield path. Additionally, more calm on the risk-off (tightening) front means less panicked safe haven flows that leave out gold and silver, whose moves are sensitive to inflation and inflation expectations (among much else).The PCE deflator would surely come below the CPI reading – by default thanks to „weighted substitution“ effects. But the fact of current inflation not meaningfully decelerating remains sticking out as a sore thumb – the Fed is playing games and jawboning inflation expectations, which thanks to the real economy including job market constrainst described above, would prove of temporary effect, springing higher as a temporarily submerged water polo ball.For gold and silver, this means a patience game where the factors remain still arrayed behind their rise. Remember, the Fed can‘t tighten as fast as it projects to – seriously raising tapering looks slated for Jackson Hole, with actual execution coming next year. Provided that bank credit creation springs back to life, this needn‘t be a problem for stocks. Rate hikes though are a different cup of tea – any thought of normalizing yields is misplaced as Greenspan, Bernanke, and Powell were able to hike Fed funds rate to lesser and lesser levels, which means that with my anticipated, persistent inflation for years to come, even the projected (market-based, for it would be the markets who raise rates, not the Fed) return to e.g. 2.5 – 3.0% range on the 10-year, would guarantee real rates conducive to the precious metals bull run.Crude oil, given the extent its prices are set outside of the U.S. control (no longer a swing producer, rig count having troubles reaching pre-corona levels given the current policies), is better positioned than the metals, where we have to wait before these „get it“. Reopening, reflation and uptick in economic activity will work to lift black gold, and energy stocks agree. In spite of short-term technical non-confirmations, the picture remains bullish, and a deep plunge in oil unlikely.Cryptos don‘t offer a happy sight for the bulls as the key 30,000 support in Bitcoin looks likely to be tested soon. Yesterday‘s move also in Ethereum reveals newfound bearish vigor. Not that the news out of China would be helpful here.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 daily downswing looks successfully reversed – just as the Friday‘s intraday attempt to close the HYG gap hinted at. With tech leadership intact, good days for Nasdaq are a mainstay.Credit MarketsHolding on to the gained ground in high yield corporate bonds while TLT doesn‘t run wild again, would be the best scenario for further stock gains.Technology and ValueBoth technology and value did great yesterday, and it‘s been the cyclicals, high beta pockets driving the S&P 500 upswing. Even the Russell 2000 decisively joined, but don‘t look for much of outperformance in smallcaps (still an understatement).Gold, Silver and MinersGold and miners are still trading in corrective depths, with not nearly enough convincing upswing attempt yet. Still, precious metals are well positioned to benefit from the Fed inability to m