Timing & trends

The Fed – What If…

Posted by Matt Machaj, PhD for Sunshine Profits

on Tuesday, 17 September 2013 14:14

In my previous article (What if the Fed Really Tapers QE?) I focused on what would be the likely outcome of limiting the QE program on several key markets (gold, real estate, stocks and bonds). Today, we will provide you with an analogous analysis for a completely different scenario.

In the following part of the article we will discuss what’s likely to happen if the Fed simply continues the QE program and informs about it in a direct way.

In short, you will find details in the table below – the above scenario is listed as #1 in the table below (last week’s analysis focused on scenario #4).

Screen Shot 2013-09-17 at 7.05.43 AM

The first case seems most probable based on the recent minutes (from 30th-31st of July; the minutes were published on the 21st of August). The Fed is likely to continue the programs, and communicate the message openly without any misinformation. Such scenario is indeed the likeliest one since despite negligible positive signs the economy has not improved sufficiently. The decision will put upward pressure on real estate, since holding on to Mortgage Backed Securities by the Fed should keep up the boost (however inefficient it may be).

In this scenario, the banking system will be covered from liquidity problems, and indirect subsidies to the banking system will be continued. The stock market should therefore grow. What happens to Treasuries? It depends mostly on inflationary expectations. In the short run we should say that Treasuries would gain because one of the main buyers, the Fed, would keep them. Nevertheless, there is a possibility that they will lose value if the market expects this type of policy to lead to inflation. In this case, the Treasuries could go down. However, possibly the Fed would step in again with some other tool to counter that (such as with the “operation twist”). There are limits to such steps, of course. However, as we mentioned last time, we do not see very high inflation on the horizon. So far…

Gold should be on its upward track within a few months (if not sooner), because upon the continuation of the intervention it will probably be considered a good dollar alternative, an anti-system hedge with the proper backup in the physical market.

Summing up, if the Fed continues the QE program and it is communicated directly, gold is likely to move higher within a few months. The full version of this report includes our analysis of 8 different scenarios (as you can see on the above table). We recommend that you stay prepared almost no matter what the Fed does by reading the entire Market Overview report. You can sign up here. 

Thank you.

Matt Machaj, PhD

Sunshine Profits‘ Market Overview Editor

Gold Market Overview at SunshineProfits.com

 

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Disclaimer

All essays, research and information found above represent analyses and opinions of Matt Machaj, PhD and Sunshine Profits’ associates only. As such, it may prove wrong and be a 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, Matt Machaj, PhD and his associates do not guarantee the accuracy or thoroughness of the data or information

  1. A number of bank analysts have suggested that gold could decline to $1000 in 2014. If economic reports continue to suggest growth is accelerating, the Fed might taper quite aggressively, and that could hurt gold prices.
  2. Indian gold imports have fallen dramatically, and the government there has asked the citizens to reduce their gold purchases, for about a year. 
  3. The Indian government hasn’t just “asked” their citizens to reduce their gold imports; highly restrictive regulations have been put in place. August gold imports were only about 3 tons, which is horrific.
  4. Over the next 12 months or so, increased demand for gold coming from China is unlikely to make up for the “bearish trilight” of reduced Indian buying, a Fed “taper caper”, and hedge fund selling.
  5. The last economic peak was in 2007, and the Fed uses a rough eight year timeframe for the business cycle. 
  6. That suggests that even if 2014 is a good year for the economy, the current economic cycle is much closer to an end than a beginning.
  7. Is the Fed acting a bit irresponsibly, by highlighting the slight increase in growth numbers now, while downplaying how late this growth comes in the business cycle? I think so.
  8. It’s quite possible that 2014 goes down in history as the year gold stocks surge and gold bullion slips. Merrill Lynch is one major firm that may agree with at least the first part of my scenario. They recently issued a major buy signal for gold stocks.
  9. Please click here now . You are looking at the daily gold chart, and I’ve highlighted a bearish head & shoulders top formation. 
  10. It’s really only a potential chart pattern at this point in time, but a rally to the $1350 area from “around here” would probably get the attention of a lot of bears. If the top pattern did fully form, the lower price targets of many bank analysts in the $1000 – $1100 zone are plausible.
  11. I’m not really a gold bull or a gold bear. Instead, I like investors to embrace gold as a key asset. Gold is wealth itself. Whether you are bullish or bearish, there are still key price areas on the “grid” that should be bought and sold.
  12. Please click here now . That’s another look at the gold chart, and it’s the only one that really interests me, from the perspective of investing in gold. The price zones of $1266 and $1200 are key buy-side HSR (horizontal support & resistance) areas.
  13. Bank “algo” (algorithm) traders are highly likely to buy gold aggressively in those areas, and I think investors in the gold community should be prepared to buy a bit there too. 
  14. The price areas of $1350 and $1425 are now areas where the same bank traders (aka the “banksters”) are likely to sell gold very aggressively. The gold community should probably prepare to engage in some selling there too. 
  15. Note the position of my stokeillator (14,7,7 Stochastics series) at the bottom of that chart. The lead line is at 14, which is where many significant rallies have started from. Regardless of the outlook for 2014, gold looks good now, from a short term technical perspective.
  16. Some analysts believe there is a correlation between full moons and changes in the short term price action of gold. The next full moon is September 19, 2013, and that’s just one day after the upcoming FOMC meeting. 
  17. If the economy improves (or is perceived to improve) in 2014, institutional investors could begin to focus on metals like platinum and palladium, due to their use in industry.
  18. Please click here now . That’s the weekly chart for platinum, and I’ve highlighted an inverse head & shoulders bottom pattern that’s in play now.
  19. Please click here now . You are now looking at the daily chart, and the head and shoulders pattern is very clear. Uncertainty surrounding Wednesday’s FOMC announcement could create substantial volatility in the price of platinum, perhaps taking it down to the $1375 area. My stokeillator is in the “buy zone”, and that’s good news for platinum fans! 
  20. Please click here now . This weekly palladium chart looks very good. There’s an enormous triangle pattern in play, and an upside breakout above $800 targets the $1100 area. 
  21. I’m a fairly aggressive buyer of silver stocks in this price area. To understand why that is, please click here now . You are looking at the daily chart for SIL, a silver stock ETF. SIL is arguably the silver community’s equivalent of GDX in the gold community. Note the blue uptrend line, and the position of the stokeillator. It’s possible that a bearish FOMC announcement drives SIL down to the green HSR line in the $10.50 area. 
  22. Regardless, I’m placing risk capital based on a scenario where the Fed announces a dovish taper, and then gold & silver stocks begin a strong rally.
  23. The top analysts at Goldman Sachs may have the same view I do. ‘“Our U.S. economists’ expectations for a ‘dovish’ taper and gold’s recent decline will likely limit the downside to gold prices,” Goldman analysts Damien Courvalin and Jeffrey Currie said in a report dated yesterday.’ – Bloomberg News, September 17, 2013.
  24. Please click here now . That’s my “chart of the month”. You are looking at the GDX daily chart, and the technical set-up is excellent. There’s a bullish wedge forming. Watch for a breakout above the red downtrend line, accompanied by a crossover buy signal on my stokeillator. Bullish action in gold stocks seems very near, and almost here!

Sep 17, 2013
Stewart Thomson
Graceland Updates
website: www.gracelandupdates.com
email for questions: stewart@gracelandupdates.com 
email to request the free reports: freereports@gracelandupdates.com

Historic Buying Opportunity Coming in Gold Stocks

Posted by Jordan Roy-Byrne, CMT

on Tuesday, 17 September 2013 13:23

Recently we’ve been writing that another opportunity is coming to buy gold stocks. While this is still the case, the facts have changed and we have to tweak our view. The evidence argues that the mining stocks are now likely to retest their lows. Rather than that buying opportunity being days away, we now feel it is weeks away. Investors and speculators need to have more patience. In this missive we discuss why a retest is coming but why it could mark a final bottom and a tremendous buying opportunity.

The first reason I expect a retest is the current recovery has veered off historical course. At the current juncture three of the four similar recoveries (chart below) were at a new recovery high and the fourth closed at a new high next week. Simply put, last week was the turning point. This is confirmed by the stocks slicing through their 50-day moving averages rather than holding.

sep13huiproj

Second, the monthly chart has also veered off course. Until the end of August, the June to August pattern resembled that of the October to December pattern in 2008. However, gold stocks reversed course at the end of August and are down 9% this month. This is not the type of action you see following a major bottom.

sep16edhuimonth

The third point is that I made an error in my last editorial. In 1976 Gold made a V shaped bottom because it declined for 18 months without any multi-month interruption. Sure, precious metals have been extremely oversold as the current bear market is two years old. However, I neglected the obvious fact that there was a huge reprieve in 2012. Gold rallied back to $1800 and many stocks reached new all-time highs. From this vantage point, precious metals have been very oversold for less than a year and thus not enough to produce a bottom without a retest.

Hours before the late June bottom I penned an editorial discussing why I felt a major bottom was imminent. Bearish sentiment was rampant. The gold stocks were nearing 9-year support. Moreover, the large caps had lost about two-thirds of their value. My historical analysis showed that only one bear market exceeded 70% and that was the cyclical bear which followed the end of the 1980 bubble and a 20-year bull market in gold stocks.

Furthermore, the gold stocks had a nearby Fibonacci target that aligned perfectly with the 2011 top, 2012 bottom and the start of the 2013 crash. That target is within 1% of the late June low. See the chart below.

sep16edgdxfib

The points mentioned above don’t get thrown out the window just because the market has failed to breakout. They are still as valid as they were a few months ago. The fact that a retest is coming doesn’t invalidate those points.

Below is a sketch of how things could potentially play out over the coming months. I say potentially because no one can predict the future. We can analyze history, tendencies and probabilities to come up with a reasonable guess. Given the evidence, I find it reasonable that the sector is not going to breakout anytime soon. At the same time, I find it unreasonable to expect the equities (especially GDXJ and SIL) to make new lows.

sep16edgdxgdxj

Near-term goals should be to make sure you are hedged if you are heavily long and to make sure you have some cash to take advantage of the final bottom which could occur in the next month or so. Note that the major bottom in 2000 occurred in November while the 2008 low came in late October. I guess the calendar is ripening for another major bottom. Of note is that GDXJ and SIL are in stronger shape than GDX. GDXJ declined 79% and recently rebounded 63%. SIL declined 65% and recently rebounded 55%. Those rebounds occurred in only two months! Just imagine the gains we could see after this retest. Readers are advised to watch closely and spot the companies which show the most strength during this retest. If you’d be interested in our analysis on the companies poised to lead this new bull market, we invite you to learn more about our service.

 

Good Luck!

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

 

 

 

Is The Sell Signal Still Valid?

Posted by Lance Roberts - The X-Factor Report

on Tuesday, 17 September 2013 2:34

While the “bounce” exceeded previous expectation levels, due to a greater
impact of short covering than anticipated, the rise did allow for portfolios to be realigned fully with our target allocation model. However, did this short term rally reverse the intermediate term “confirmed sell signal” issued two weeks ago? The chart on the next page shows the market versus the confirming
buy/sell signal.

What is important to notice is that following the previous selloff in the market – stocks reached a new closing high as they entered overbought territory. This followed a 110 point rally in the index. From that point to the next closing peak was only 40 points. However, NO SELL SIGNAL was ever issued.

Screen Shot 2013-09-16 at 7.21.25 PM

…..read it all HERE

Incredible Events Now Unfolding

Posted by King World News

on Monday, 16 September 2013 23:55

Fed, LBMA, Comex & Banks On The Edge Of Disaster

London metals trader Andrew Maguire, who broke the news to King World News about two courageous JP Morgan  whistleblowers confessing that JPM manipulates the gold and silver markets, warned KWN that the Fed, LBMA, Comex, and the bullion banks are now on the edge of disaster.  He also told KWN exactly where massive central bank buying will come into the gold market.  Below is what Maguire had to say in this powerful interview.

Maguire:  “The downside for the central banks is that short-term interventions have further emptied the physical vaults (once) again.  And where is this gold coming from?  It’s coming out of unallocated bullion bank inventories (at the Comex).  The central banks may be leasing out gold, but it’s not leaving their vaults (at this time)….

……read more HERE

Incredible Events Now Unfolding In The Gold & Silver Markets

With gold and silver beginning to approach the key area where London metals trader Andrew Maguire told King World News there would be massive central bank buying, today James Turk spoke with KWN about the incredible events which are unfolding.  Turk also sent KWN about silver a powerful chart to go with his commentary below.

Turk:  “There are so many important news events going on at the moment, Eric, that one has to pick and choose where to begin.  However, I think the most stunning development is your interview with Andrew Maguire.  For years there have been outcries that the CFTC is not doing enough to investigate the manipulation of the precious metal markets.  

But these complaints have been met by blatant stonewalling, as evidenced by a CFTC investigation of silver manipulation that has now been ongoing for 5 years…..

….read more HERE

As the Fantasy Dies: “Panic Will Ensue”

The US government may have funded studies and propaganda material which says that people will not panic, loot or go hungry in the midst of a crisis, but the fact of the matter is that history has shown otherwise.

bankrunnorthrock2It’s often the case that, despite countless warnings from those considered to be fringe lunatics, the vast majority of the populace is blindsided by horrific, paradigm-altering events. The signs are almost always there, but people simply refuse to believe it can happen to them. ”It” always happens somewhere else, and we get to watch it play out on television from the comfort of our living rooms.

But, as financial guru and strategic investor Bill Fleckenstein points out in the following highly insightful interview with King World News, America’s fantasy of unlimited borrowing, consumption and confidence will soon be revealed for the sham that it really is.

…..read more HERE

 

                                                                                                                                       (Pictured: Northern Rock Bank Run; 2006)

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