Stocks & Equities
Wednesday Report Posted at 10:17 pm –
Tonight I would like to show you some really big consolidation patterns in regards to some big cap tech stocks mainly the networking and semiconductors. I have shown you some of these big bases in the past but now I’m going to create a brand new portfolio based just on these big patterns. It definitely won’t be as exciting as trading in and out all the time as the game plan will be to hold these stocks for a minimum of two years, no trading. This will be an investment portfolio based on these massive consolidation patterns. Big base or consolidation patterns equals big moves.
I’m seeing too many of these big bases breaking out and the stocks moving higher without our participation. This will be a low stress way to make some serious money if you have the discipline to hang on when there is a correction. Think if you had bought some of the better stocks back at the 2009 crash low and held on over these last six years or so. It’s much easier said than done. At any rate I’m going to show you some stocks that I think have a great future regardless of why the stock markets are going to crash and burn any day now. That’s is basically all we’ve heard since the 2009 crash low and here we are now with many stock market indexes making multi year highs.
For most folks I would think that they should have at least a minimum of 50% of their portfolio in some of the better long term stocks. With the stock markets consolidating for long periods of time this will keep you out of trouble trying to catch every twist and turn that is virtually impossible to trade.
The two areas I’m going to focus in on are the semiconductors and the networking areas as I believe they have some catching up to do compared to some other areas of the markets like the biotech and healthcare that have and are still a good place to park some capital.
Lets start by looking at the two indexes the $SOX semiconductor index and the $NWX networking index. I have shown you this long term monthly chart for the SOX several times in the past which is showing us one of those massive consolidation pattern, the 10 year bullish falling wedge. From a Chartology perspective it’s a pretty as it gets. Note the breakout from the black dashed horizontal support and resistance line about a year and a half ago with the backtest from the top which found support during the October low of last year and the quick bounce to the present. Also note the very last bar on the right hand side of the chart which shows the SOX hitting new multi year high this month.
MT Ed Note: Great Report – for the best look at these 9 charts click HERE or on Chart (each click increases size)
MT Ed Note: For the best visible charts (9) click HERE or on Chart above (each click increases size)
Our beef with our own generation is not that it failed, but that it succeeded too well.
It took control of government and used it like an ape uses a rock – to crack open a nut.
But we’ll come back to that in a minute…
The Dow Takes a Dive
First, the Dow dropped 190 points yesterday – or 1%. It is threatening to close below 18,000 for the first time in almost three weeks. We’ll wait to find out.
Yesterday, a London-based magazine and a TV station interviewed us. Both asked if we were “pessimistic.”
“Of course not,” we replied. “We expect today’s financial system to fall apart in a terrible crash and depression. But we’re looking forward to it.”
This was not exactly the answer they were looking for… And there’s not enough time in an interview to explain why this view makes any sense at all. The audience must have thought we had lost our mind.
We also had a meeting with our old friend and editor of the Gloom, Boom & Doom Report Marc Faber yesterday. He helped make sense of our “pessimism.”
“The system is corrupt,” he said. “The government. The banks. The central banks. Big business.”
People always use their wealth and power to try to protect themselves. Sometimes they use it to take wealth and power away from others, too.
That’s corruption.
Of course, that’s what government was designed for: to allow one group to rob another. If the elite could take no advantage from it, why would they bother with government at all?
Dirty Work
We baby boomers took over in the 1980s. We have been in charge ever since.
Since then, we’ve corrupted the economy, the markets, and government.
By the 1970s, some of the dirty work was already done: The Nixon administration had ditched honest money. Now, the coast was clear. We could use this new credit-based money to pervert the whole shebang.
The U.S. government used to be limited. That was the point of the Constitution – to restrict the feds’ power.
Much of the restraint was financial. States were forbidden from making anything but gold and silver legal “tender.”
But there was restraint when it came to foreign wars, too. Congress was supposed to bear the sole power not only to put troops in the field, but also to raise the money to pay for them.
Today, the Constitution is in a musty drawer somewhere; not even the Supreme Court justices can find it.
The new money, along with a sans souci attitude toward debt, changed everything. Now, the feds can get away with anything – including murder – if they put the right spin on it.
Pretend to be fighting terrorists, drugs, cancer, racism, global warming, lack of consumer demand, or tobacco use and nobody asks questions.
Capitalism No More
The Reagan administration talked about balanced budgets and fiscal conservatism. But within months of arriving in Washington, the Republican Party rolled over.
Since then, it’s scarcely ever met a zombie it didn’t like – especially if he had a gun in his hand. Wars overseas. Wars at home. Every fight cost money and every one was a loser.
But not for everyone…
And now capitalism is no more – not in the 50 states at least. Now we have cronyism, in which businesses angle for favors from the feds.
Why the switch?
It is more profitable.
Another old friend, Strategic Investment editor Jim Davidson, described the payoff:
The Sunlight Foundation reports on research it undertook between 2007 and 2012, tracking 200 of America’s most politically active corporations:
“After examining 14 million records, including data on campaign contributions, lobbying expenditures, federal budget allocations and spending, we found that, on average, for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government. The $4.4 trillion total represents two-thirds of the $6.5 trillion that individual taxpayers paid into the federal treasury.”
“That translates to a 75,900% rate of return,” says Jim.
Real capitalism means taking real risks… working hard… getting lucky… and discovering the future.
Cronyism is safer and surer. It favors old, established businesses, the ones that can afford expensive lobbyists.
It doesn’t lead to wealth creation or progress, but it is easier for politicians and central planners to work with. They know where the money is!
And they can plan for the past; it’s the future they have trouble with.
But wait… We came to praise our fellow boomers, not to bury them in scorn.
Have we nothing nice to say about our own generation?
Regards,
Bill
USDCAD Overnight Range 1.2398-1.2480
The Bank of Canada left interest rates unchanged while the statement reflected the modestly rosier outlook painted by Stephen Poloz in his speech last week. Unfortunately for USDCAD bears, it wasn’t rosy enough to offset the tide of global dollar demand sparked by renewed optimism that the long waited US economic recovery is starting to take hold.
The US dollar rally paused in Asia, except for USDJPY which returned to June 2007 levels on the back of bullish technicals and stop loss buying.
EURUSD appeared to consolidate yesterday’s losses in the European session but bounced higher in New York on the back of a news report suggesting that Greece and its creditors were making progress on an accord. EURUSD jumped to 1.0915 from 1.0830 on the news.
USDCAD technical outlook
The intraday USDCAD technicals are bullish and looking for a move to 1.2560. The break of resistance in the 1.2390-1.2400 area will act as support on a correction as will the uptrend line down at 1.2340. For today, USDCAD support is at 1.2410, 1.2390 and 1.2360. Resistance is at 1.2470, 1.2505 and 1.2560.
Today’s Range 1.2430-1.2520
Chart: USDCAD Daily with target shown
Last week, I told you how the smart money, the kind that moves first at the slightest sign of trouble, is on the move again.
Into high-end art, rare coins, diamonds and more.
There are numerous reasons why. Chief among them: The big, savvy and smart money knows what’s coming. Western socialist governments, on their death beds, are on a witch hunt to find every penny of wealth you have, track it, and tax it.
Some of you may think the rich deserve to be taxed more. Maybe so, maybe not. I’m not going to get into that debate today.
But what I am going to tell you is that if you think it’s only the rich under attack, think again.
Washington and Brussels want your money, too. They want to know how you’re earning it. Where it’s coming from. Where it’s going. Every penny of it.
They also want to control it. They want to get you to spend more to boost the economy. Hence, why negative interest rates, a tax on your money, is spreading through Europe.
Why JP Morgan is the first in the U.S. to impose negative interest rates on customer funds in excess of $250,000. Why more such policies are coming, yes, even here in the U.S.
And perhaps most important of all, why authorities in Europe and the U.S. are moving to abolish cash.
Never mind most of what you already do is electronic. You bank online. You trade online. You conduct business online.
That’s not enough for Washington or Brussels. They want all cash gone from the system.
Think I’m kidding, or fear-mongering? Think again. I have long warned that the world was headed to a new, cashless monetary system and to a new reserve currency.
The first such steps have already been taken. The International Monetary Fund (IMF) is now working behind the scenes to make its Special Drawing Rights, or SDRs, the new global reserve currency.
The World Bank is working on its own version.
All over Europe now, cash is under attack. Spain has banned cash transactions over 2,500 euros. Italians have been banned from using cash transactions of more than 1,000 euros, while France is expected to introduce a similar law in September.
France, by the way, is also requiring that all gold in the country and transported through the country must be declared and reported to French customs.
While large cash withdrawals exceeding 10,000 euros per month will also now be monitored and reported.
Throughout Europe now, foreign exchange offices are now required to obtain a copy of someone’s ID to exchange more than 1,000 euros.
In the U.K., former Prime Minster Gordon Brown is advocating abolishing all cash and forcing people to use all electronic money via a new nationalized bank.
In effect, Brown wants to usurp the money supply and control it better, he thinks, via a communist-type move to control your savings and spending, allegedly on your behalf.
In Denmark, at least, authorities are being more open about it. They’re preparing to introduce a law this fall to make virtually all transactions electronic.
It’s not just Europe, though. In many Central and South American countries, finger-printing is required by certain stores and businesses if one pays in cash with US$100 or more. Western Union has certain policies in place that require finger-printing outside the U.S.
Mexico has restrictions on numerous cash transactions.
Here in the U.S., while there are no national cash bans in place, a new trend is indeed emerging.
Louisiana, for instance, recently banned cash transactions for second-hand merchandise — making it tough for flea markets to survive.
In many states, pawn shops are now under very strict scrutiny when it comes to cash transactions, with a good deal of paper work now demanded.
Of course, the propaganda coming out of governments is that cash is how most terrorists and drug dealers work. Outlaw cash, and we put them out of business.
But you and I both know it goes well beyond terrorism and drugs. Just like the NSA spying has. It’s simply another way to spy on you, and to track and tax you — so the government can gain greater control over everything you do.
The problem is that it is going to get worse. Your rights are being trampled on, left and right. The Constitution means nothing these days.
But you have to stop and ask yourself one question: Why do governments want so much power over me these days to control and tax me?
The answer is simple: Western socialist governments are on their death bed, they are fighting for their lives, and if it’s a choice between them and you and your rights, they will always choose themselves.
In the end, they will fail. Governments can indeed fool some of the people some of the time, but over time, they can’t fool the majority. The people of the world, especially Europe and the U.S., will rise up and throw the bums out …
In one heck of a giant rebellion and revolution that is coming.
Stay tuned and best wishes, as always …
Larry
Background
Gold has 2 major hurdles to overcome and they are as follows:
1. Interest rate rises in the US
2. Money printing by other nations, Japan, UK, Europe, etc.
Both support the US$ and put downward pressure on gold.
The Chart above compares Gold, USD, Euro, Pound and the HUI.
The specter of interest rate increases in the US hangs over the precious metals sector like the Sword of Damocles. The Federal
Reserve has stated that they want to ‘normalize’ rates now that the period of Quantitative Easing is over. Employment figures published by the Department of Labour have shown a steady increase in the number of jobs created over the last twelve months or so. On the inflation front; core prices, which exclude food and energy rose at a yearly pace of 1.8% for the month of April, which is the fastest monthly rise for almost a year. These data points will be viewed in a positive light by the Fed in that the economy is on track and recovering at a sufficient rate to allow for tighter monetary policy.
The European Union has announced a programme of Quantitative Easing for their members in an attempt to boost the European economy. The effect of this action will be to dilute the purchasing power of the Euro and so its value will fall. The same goes for the British pound and the Japanese Yen. These three currencies make up the lion’s share of the US Dollar Index, so as they drop it follows that the dollar will rise. The rising dollar will exert downward pressure on gold rendering gold cheaper in dollar terms.
Conclusion
It should be mentioned that gold has been outperforming most currencies other than the US dollar to the benefit of those living or trading in such currencies. However, they have all underperformed when compared to the dollar, so for those who wish to hold some of their funds in cash then the dollar rules.
At this stage of the cycle we remain of the opinion that the above mentioned factors weigh heavily on gold and as such gold’s progress will be severely hampered in the coming months. We also believe that some investors will throw the towel in and walk away from this sector thus precipitating a final capitulation in the precious metals sector.
The lion’s share of our investment funds are in the dollar as it continues to outperform the precious metals sector and we think it will continue to do so for now.
Patience is the order of the day and though it isn’t an exciting stance to take it certainly beats losing money.
We will continue to watch the Fed for what they say and do bearing in mind that they are ‘data driven’ which tells us the situation is fluid and subject to change. However, for those who are waiting for the advent of more Quantitative Easing, this is not going to happen and is certainly not on the cards for this year.
The producers may be cheaper than they have been for some time but that does not make them cheap or a viable investment opportunity. The mining sector has oscillated wildly this year but has gained nothing as the Gold Bugs Index, the HUI, is at the same level as it was in early January 2015.
Rallies will come and go but without the formation of new higher highs and some decent traction, this sector is held prisoner by the rising dollar and the continuing dilution of the other major currencies.
Patience is the order of the day and funds kept in US dollars are the current outperformers. Use this time to analyze and research the stocks that you would like to own and formulate a short list that you can manage and keep up with once you have made the purchase. Our watch list is huge but if we had to move tomorrow we have identified around 20 stocks that we would be happy to own and we will continue with the due diligence as a week can be a long time in the life of a mining company.
We currently retain 70% of our funds in dollars and are glad we did so as they have strengthened considerably which should enable us to purchase more stocks and or gold and silver when the bargains present themselves.
Stay flexible and don’t be afraid to place the occasional short trade as and when the market is overbought. These trades may take time to eventuate, but when the outlook in the short term is bleak the risk/reward environment is favorable.
Finally, go gently and only deploy small amounts of capital until a new direction is confirmed, we all need to be able to take a hit and live to fight another day.
Got a comment, then please fire it in whether you agree with us or not, as the more diverse comments we get the more balance we will have in this debate and hopefully our trading decisions will be better informed and more profitable.
Go gently.
Disclaimer: www.goldprices.biz or makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is not a guide or guarantee of future success.
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