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As you know, I am following the fascinating story of electric vehicle development because it promises to be one of those technologies that could transform the means by which we travel. It could also be the tipping point technology that occurs at major highs in the stock market.
Just this week, a politician in France announced the country would ‘ban’ petrol and diesel vehicles by 2040. This is being taken seriously, especially by the ‘environmentalists’ as it boosts their demand for reducing carbon emissions. And this week, Volvo announced it will go ‘all electric’ by 2019. It seems the march towards electric is unstoppable. The hype is ramping up.
But for a start, isn’t 2040 an unseeable 23 years into the future? Is it not possible that the dominant means of propulsion in 23 years will be something else entirely, such as natural gas or hydrogen in fuel cells? At the rapidly accelerating rate of change of technology in many fields at present, 2040 is so far into the future that any forecasts made today will almost certainly be wide of the mark.
But that’s what politicians do – they grandstand as their default position. How else will they get MSM coverage? I have often wondered what they actually do, other than generally make our lives that much more regulated (unless of course you are on the gravy trains they create). But I digress.
That’s what happens when bullish sentiment gets out of hand – all sorts of super-confident assertions are made. Here is a good review of the topic.
There is one other development that is so far mostly off the radar of UK MSM – flying cars. Yes folks, flying cars are back! And there is an electric VTOL model to complete the theme.
Of course, the dream of having a flying car has been the stuff of sci-fi fantasies for decades, but I believe the fact that many companies are building working machines now and there is a regulatory move to have them on the road/in the air is a sign of extreme bullishness that mirrors the stock markets that are near their top.
Of course, the reason they have not made it to the mainstream is the safety aspect. Will they come with parachutes in case of a collision with an uninsured driver/pilot? And getting insurance will surely be a nightmare.
Ironically, what all this propaganda about electric vehicles has done is produce heavy selling of Tesla shares as they are looking at stiffer competition from a whole range of manufacturers both start-up and the established big boys. Here is the short term chart showing the carnage
The sharp decline is pretty clearly a third wave which may or may not be complete. But when it does so, I expect a wave 4 counter-trend rally and then a down move in wave 5. That should be wave 2 of a larger wave pattern. And if this occurs, this five down will be the start of a much larger bear trend.
Treasury bond yields are rocketing – as I forecast
I have been bearish US Treasury bond prices for some time. It is one of my all-time favourite markets to trade. In fact, I managed to catch the all-time 177 high in prices in July last year. Since then, the market has traced out a lovely five waves down to the March low around the 145 level – a massive decline of 32 big points. Nice.
And off that low, the market has staged a relief rally in the shape of a three up, which is the textbook response – and according to Mr Elliott an impulsive five is followed by a relief three. And when the third wave has completed, the established downtrend can resume.
I had a target at the 157 level – which it reached only two weeks ago – for the extent of this third C wave and forecast that the next big move would be hard down.
But little did I know that the hard down off 157 would be very hard indeed! In fact, the market has closed down in 7 of the last 8 main sessions and has lost 5 big points so far
And the decline has traced out a nice five down shown on the 2-hr
Odds are high that a relief bounce should start next week and my target is the 153 – 154 zone.
Memo to traders: This market is the largest in the world and dwarfs trading in the NYSE. It conforms well to the Elliott wave model, displays great tramlines and obeys Fibonacci relationships closely. This makes it an ideal market to trade, so if you do not currently have it on your radar, you are missing out on some great profitable moves!
Another indication that bond yields are heading up is this chart of the Junk Bond Index
The MACD chart at the bottom shows the entire rally off the March lows has been weak and last month, the two lines crossed to give a sell signal. Now, the market is testing the 50-day MA again and a sharp break here would be very bearish. Remember, junk bonds trade more like equities than investment grade bonds (US Treasuries) and so they are at present caught between a rock and a hard place, Equities remain elevated while Treasuries are sinking. Something has to give – and it is usually the Treasuries that give the correct signal.
VIP Traders Club members are short.
Gold/Silver about to rally
Both have been very weak in recent weeks with large declines last week. But I believe a very sharp rally phase lies ahead for both. The two charts are very different. Here is gold over the past year
The waves have been many and large, but I have managed to catch many of them. But I have been caught short (not in the trading sense!) by missing out on this latest decline. As of yesterday, my C wave reached the Fibonacci 50% level at $1210 and a recent DSI reading was 10% bulls – near an extreme.
Here is silver over the past year
It has been much weaker than gold especially in recent weeks. In fact, it has moved below the January low while gold has only moved to 50% of the post-January rally. To some extent, this is surprising because silver, as a part industrial metal, can trade with equities which have been buoyant over this period. Hmm.
Also, with yesterday’s new lows, I can see the entire move off the August highs as a giant A-B-C. That would infer moves to new highs above $22 in due course.
But now with bearish sentiment near extremes, and many sell stops in silver that were placed below the January lows being elected yesterday, the way is clear for a massive rebound to trap the hedge fund shorts in yet another massive short squeeze.
Perhaps if shares can turn down in the next week or so (likely), gold will catch a flight-to-safety bid and propel both northwards. That is the scenario I favour.
Several members tell me they are puzzled by the PM weakness while the euro surges higher. The discrepancy was particularly stark last week. But if you compare the charts over a few decades you will find periods when PMs traded with the dollar and against it in other periods. They really is no reliable correlation you can use to guide your trading.