Timing & trends
Everyone and their brother now thinks that gold and silver are headed to the moon. All because they’ve had a decent rally of late. Gold jumping from its low $1,044 last December (nearest futures) to as high as roughly $1,268 recently …
Silver from a low of $13.62 (nearest futures) last December to a recent high of as much as $15.99.
And truth be told, gold and silver have indeed most likely bottomed, right on target with my forecast for last year, to bottom in late November/early December.
So why am I panning gold and silver now? Actually, I am not. I am panning all the pundits and investors out there who now say gold and silver are headed straight up to new record highs … and that if you don’t buy now, you’ve missed the train.
Nothing could be further from the truth. You have not missed the train. But what I do NOT want you to do is jump on the gold and silver bandwagon at an intermediate-term top!
Instead, I want you to be buyers on the next pullback, buying when everyone else is turning bearish again … buying near the next set of lows … so you can then maximize your profit potential.
Good, healthy, strong, long-lasting bull markets are made up of zigs and zags higher. Strong rallies. Followed by sharp, deep pullbacks.
And that’s exactly what’s about to happen in gold and silver. Not to mention platinum and palladium.
Here’s one way I know: My trusty cycle analysis of gold, based on my artificial intelligence and neural net models that analyze tens of thousands of trading data points on gold and silver and then crunch them billions of times over to find the most probable cycles and forward path for prices.
Take a look. What do you see? Gold topping now, and heading lower into early June.
From there, we should then see gold’s next major leg higher begin.
Ditto for all the other precious metals.
So my best advice right now, as hard as it may be to follow, is NOT to buy any gold and silver.
And instead, to wait patiently for the next opportunity.
How low can gold and silver go on this pullback?
Gold can fall all the way back to $1,180, possibly even lower. Silver can fall all the way back to the low $14 level, possibly even $13.50.
As far as I am concerned, I will be using this upcoming pullback to get bearish gold and silver, to make money on the short side. And, I will be advising my trading subscribers to do the same.
But that’s not for the faint of heart and it’s not for me to recommend in this column, as timing is everything. I could not possibly get you in and out of the market in a column that publishes once a week.
The same thing, of course, applies to virtually all markets. I can’t give you timely recommendations in a weekly column. I need to be able to communicate with you daily, sometimes more than once a day, and by hook or crook, text messaging, emails, voice broadcasts, whatever means.
I’m merely mentioning that now for only one reason: Nearly all markets are now heating up in a way where there will be more fortunes made by savvy traders than at any time since the late 1970s.
And if you want to be a part of it, you should consider one of my trading services. It could be the best step you ever took for your finances.
Meanwhile, there’s something else I want to warn you about, not just the coming pullback in gold and silver.
It’s the crooked gold and silver dealers that are now surfacing on TV and newspapers again.
They are using the political mess in our country to pitch highly overpriced gold and silver coins and commemorative pieces to the public.
They use well-known actors, who get paid a lot of money to make the pitch. The pitches look and sound great of course. And they are made by professional sounding firms that usually have the word “Mint” in them.
But they are complete, unadulterated rip-offs. One such commercial that’s airing frequently is selling a silver eagle coin, calling it a mint state strike — for $25 a coin. That a whopping 59.33 percent premium over the price of silver.
What a rip-off! There’s nothing special or mint state about the coin. It’s a con game, plain and simple.
WHEN it comes time to buy gold and silver again, I’ll tell you where you can get the best deals.
For now, do not buy any gold and silver and steer clear of all the bullion advertising you’re seeing now in print and on TV. They’re mostly scams.
Best wishes, as always …
Larry
He who trims himself to suit everyone will soon whittle himself away.
Raymond Hull
Gold has closed above $1230 and indicating that a bottom is in or that one is close at hand. The trend has turned neutral from negative thus giving Gold a much-needed boost to potentially test the $1350 ranges. India however, dealt the gold markets a negative blow by maintain the tax on Gold and suggesting that they would increase it slightly. This development could be overshadowed by a more positive development that concerns central bankers. Central bankers overall have been purchasing Gold rather aggressively over the past 24 months. However, the biggest buyers are not from the west; they areRussia, China and Kazakhstan. Central bankers in the West are embracing negative interest rates with open arms.
Source: www.bloomberg.com
The trend in the dollar, on the other hand, is neutral, but not too long ago it was up (bullish), and until it turns negative, the outlook favours a resumption of the dollar bull.
Euro; the trend in the Euro has turned neutral from negative and until it turns positive, all rallies are destined to fail. The Euro and Gold tend to trend in the same direction, and as the trend in the euro is still neutral, we have to assume that Gold will start to face some headwinds soon. However, there is a silver lining; Gold and the dollar have trended in unison in the past and hence a weak euro does not mean that Gold cannot continue trending upwards in the face of a stronger dollar.
There is one more hurdle for Gold, and that is negative rates; negative rate wars have started and in such a low-interest climate Gold does not tend to fare well. Thus, it will be interesting to see how Gold holds as the negative rate wars gain traction. So far, the action looks promising as Gold is holding up well and several Gold stocks have experienced strong moves.
Please all, and you will please none.
Aesop
It’s been awhile since we last looked at the US dollar which has been consolidating its big impulse move up. The reason I haven’t posted it much is because it’s stuck in a sideways trading range going back over a year now.
99.9% of Market participants are either Bullish the Dollar , with all the implications including Lower Gold Prices or Bearish the Dollar, with the opposite implications .
However there are not two but THREE possible outcomes to this present trading range.
For the Bulls , the breakout is in progress with a present backtest of the bullish flag .
For the bears , if the 200 day ma fails to hold support in this general area for the bottom of a right shoulder, a move back down to the bottom of the trading range would then setup the possible rectangle consolidation pattern around the 93.25 area. The least likely, but is possible, is a huge double top if the price action breaks below the bottom rail.
The third possibility , the one most don’t consider , is a prolonged trading range. At this point I favor the sideways trading range that forms a rectangle consolidation pattern as I explain below.
Note the three smaller red consolidation patterns that formed during its big impulse move up from mid 2014 to the early part of 2015. That’s what a strong impulse move looks like. Normally in strong impulse moves you’ll see at least three smaller consolidation patterns and on rare occasions four which strongly suggests you’re getting close to the end before a much bigger consolidation pattern starts to form. As you can see that is what has taken place so far.
Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,050, and profit target at 1,900, S&P 500 index).
Our intraday outlook is bearish, and our short-term outlook is bearish, as we expect a downward correction or short-term uptrend’s reversal at some point. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence. We decided to change our long-term outlook to neutral recently, following a move down below medium-term lows:
Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): bearish
Long-term outlook (next year): neutral
ACTING: A few days ago a young subscriber asked me, “Russell, you’ve been dealing with the markets since the late-1940s. This is a strange question, but what is the most important lesson you’ve learned in all that time?”
I didn’t have to think too long. I told him, “The most important lesson I’ve learned comes from something Freud said. He said, ‘Thinking is rehearsing.’ What Freud meant was that thinking is no substitute for acting. In this world, in investing, in any field, there is no substitute for taking action.”
This brings up another story which illustrates that same theme. J.P. Morgan was “Master of the Universe” back in the 1920’s. Morgan belonged to many exclusive and expensive clubs. One day a young man came up to Morgan and said, “Mr. Morgan, I’m sorry to bother you, but I own some stocks that have been acting poorly, and I’m very anxious about these stocks. In fact worrying about those stocks is starting to ruin my health. Yet, I still like the stocks. It’s a terrible dilemma. What do you think I should do, sir?”
Without hesitating Morgan said, “Young man, sell to the sleeping point.”
The lesson is the same. There’s no substitute for acting. In the business of investing or in the business of life, thinking is not going to do it for you. Thinking is just rehearsing. You must learn to act.
That’s the single most important lesson that I’ve learned in this business.
Again, and I’ve written about this episode before, a very wealthy and successful investor once said to me, “Russell, do you know why stock brokers never become rich in this business?”
I confessed that I didn’t know. He explained, “They don’t get rich because they never believe their own bullshit.”
Again, it’s the same lesson. If you want to make money (or get rich) in a bull market, thinking and talking isn’t going to do it. You’ve got to buy stocks. Brokers never do that. Do you know one broker who has?
A painful lesson. Back in 1991 when we had a perfect opportunity, we could have ended Saddam Hussein’s career, and we could have done it with ease. But those in command, for political reasons, didn’t want to face the adverse publicity of taking additional US casualties. So we stopped short, and Saddam was home free. We were afraid to act. And now we’re dealing with that failure to act with another and messier war.
In my own life many of the mistakes I’ve made have come because I forgot or ignored the “acting lesson”. Thinking is rehearsing, and I was rehearsing instead of acting. Bad marriages, bad investments, lost opportunities, bad business decisions — all made worse because we fail for any number of reasons to act.
The reasons to act are almost always better than the reasons you can think up not to act. If you, my dear subscribers, can understand the meaning of what is expressed in this one sentence, then believe me, you’ve learned a most valuable lesson. It’s a lesson that has saved my life many times. And I mean, literally — it’s a lesson that has saved my life.
About Richard Russell:
Richard wrote for Dow Theory Letters almost every day of his adult life, mailing the letter out faithfully every ten days to three weeks beginning in 1958. In 1991 Dow Theory Letters began publishing online, which allowed Richard to write daily. This he did until about a week before his passing on Saturday, November 21 2015 well into his 90’s . Dow Theory Letters was the longest investment letter in the industry continuously written by the same person.
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