Get Ready Get Set….

Posted by Mark Leibovit & Michael Campbell

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Mark, let’s cut to the chase. We are looking at a obvious correction in the commodities market and the big question that everybody’s got is how do investors go about it? Correction or trend change?

Mark: Correction. I’m still in the camp that the winds are at the back in this big 20 year up cycle. Let’s reflect back to April 2008 when silver was $20 an ounce and it dropped within a couple of weeks to $9 an ounce. It was thought it was the end back then. We are in that kind of corrective phase now, it happens every couple of years. You got to take the perspective that this is part and parcel of the business. In this case however, I think a lot of this was government initiated, you know I call them the plunge protection team. You know they are pretty well known and I write about it in my newsletter. Ben Bernanke Tim Geithner decided for political and other reasons that crude oil was too high. Food prices are too high too with so much speculation they call the CME they raise margin requirements. So this has orchestrated this correction. Also from a cyclical point of view, some of my work was suggesting that by June we probably would see a little trading top. We tend to get negative seasonality in the summer in the metals anyway. So there’s no great surprise here in a sense that we had a big move and we are due for a correction. The question is how long will it take to come out of it? You know it’s several months usually, it takes a little time to work your way out of this.   

Michael: We tend to forget that you can go up and then you can come down and consolidate for a while, as you were just alluding to.

Mark: There’s money to be made on the downside too. We can be in an inverse ETF and make some money as silver is going down, and basically as a technician and even intermediate player in the market I don’t care which direction they go. For the long term holders I don’t see any trend changes, and look how gold has held up beautifully on this correction. Silver got nailed because it just was more speculative. I think basically this is a correction; we may get a little bounce here in the next couple of three weeks but I think you got to be looking at a negative seasonality through the summer. We’re re-evaluating the fall, if they surprise me and they break out here all the better, but I would bet that we need a little corrective work done in this area.

Michael: I think and you’ve done obviously an excellent job.You’ve been measured as the TIMER DIGEST’s top market timer for long, intermediate and short term during various years in the ten year cycle, plus Gold market timer of the year. You’re talking Long term now?

Mark: A couple of weeks ago before we had the break in silver the headline on the weekly gold letter was we hit our targets and I said be careful, we are going to get a correction.  I’ve always taken this position Michael that there’s no surprises in the market.  You see an extended market, you see volume patterns deteriorating, so basically the market’s doing what it needed to do and I think it’s healthy. The trend is a big picture up and it’s a question of patience if you’re an investor.

Michael: You also do a yearly forecast, you have a model based on cycles. Can you to elaborate again where are?

Mark: In the metals we are were looking for a sharp rally into June and it ended up being a May top,  it was a little off on the exact timing. I’d be bearish probably to the fall based on that seasonality cycle forecast.

Michael: If you’re looking out two three four five years, are  you still looking for significantly higher prices at some point in that cycle.

Mark: Absolutely, I think silver is going to be triple digits, gold’s going to my big picture target of 3,000 3,600 at least. I just got back from the Money Show in Vegas where Steve Forbes was predicting gold 2,000 an ounce by the end of this year and the US on the gold standard in five years. I mean the big picture trend’s up. 

Michael: I remember two years ago you said  in January of ’09 at our outlook conference there and you said it to me and our audience when silver was trading between $10 and $12 that silver’s first stop is going to be over 30 sooner than later and your target’s 43 to 48 . You didn’t give me the last .50 cents.

Mark: I can make mistakes and be off a little bit too but ultimately the market humbles you I change my opinion if I have to. In this case I would have bet the market would have stayed up until June instead of being an early May peak based on the cyclical.

Michael: What about oil prices?

Mark: Negative volume patterns there too. We came off the top and I would bet probably the 80s in crude oil the way the charts are setting up right now. Big picture,  Jim Rogers was talking about 200 a barrel.  

Michael: David Bensimon’s talking 400.

Mark: Right., Right now we’ve had some negative volume. When the time is right, it could be two weeks six months, unless we come out with some great new technology I can’t see why crude oil can’t move higher over time. This is just a worldwide demand.

Michael: Your book The Trader’s Book of Volume which is brand new and done very well, people are buying it because it’s a definitive guide to how you work. One of the things you always say to me Mark,  is it’s not your opinion but that you let the market tell you what your opinion’s about to be. You’ve said when there’s momentum and people are getting excited, it’s like being at an auction. When more people are starting to bid, you want to be there to recognize that’s what’s happening.

Mark: Just before this big last thrust to the upside in silver there was tremendous up surge of volume in the silver futures and the ETFs.  Of course we had little parabolic move there but that’s part and parcel of the game. It’s exciting, I mean I’m happy to see these blow outs because it gives you an opportunity to make it in both directions you know.

Michael: One of the things you’ve mentioned today is exchange traded funds that give you an opportunity to play markets going up and down. For the investor who’s not part of  the Future’s Market, is it much easier with exchange traded funds.

Mark: Yes the average investor could be investing with a fund manager who is using inverse ETFs to hedge a portfolio. It’s not speculation anymore it’s a money management strategy.

Michael: If  you see a corrective mode coming you don’t have to ride it through and you can take some money off the table before these abrupt moves. Take this correction as an opportunity over the next several months build that portfolio back. Is that what you’re saying Mark?

Mark: Right, I’m in a position now.  That’s what I’m going to be waiting to do absolutely, nibbling and buying back. So I would say the trend’s your friend in the markets but you know you got to be prepared for that shake out.

Michael: What about the overall stock market?

Mark: Overall the stock market is in a little corrective mode here and I think the summer doldrums have hit the market. I’m a little concerned when names like Goldman Sachs are under pressure, it’s déjà vu. Last April May before we had the flash crash you remember we had Goldman Sachs issues then, and I don’t like seeing names like Apple Computer under pressure. So I think there’s a little selling going on here but I think ultimately we’re coming out of it. Why? The accommodative fed, we still have an election next year in the US, and I still think there’s a lot of money on the side line. So sell May go away come back in the fall and I think we have another big move coming that’s sort of my move.

Michael: Well I hope we have a chance to talk many times before that Mark.

Mark: Thanks for having me Michael.

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Mark Leibovits publishes the VRTrader Silver & Platinum Daily Service HERE. Mark’s Trader’s Book of Volume can be bought on amazon.com  The Trader’s Book of Volume, and I’ll tell you that has been a winner. But it really helps create a sophistication of how you approach these markets. Just a quick reminder go to www.moneytalks.net, click on the Facebook page because we are going to do a random draw for people off the Facebook page. Four people are going to get the whole CD collection from the Conference here in Edmonton if you weren’t able to attend.