Gold surges – but can it continue with rising dollar?

Gold surges – but can it continue with rising dollar?

How do you make money in the markets? It’s simple: a) choose the right direction and b) get your entry timing as perfect as you can. It’s no good if you get the direction right and get your timing wrong. Sitting on a losing trade as the market goes against you is not my idea of success. So trade timing us critical. That is why I developed my Tramline Method. I must see the market go my way pretty much straight away.

Last November I posted a video: “Latest Gold Update – be ready for massive surge” when Gold was in a deep correction and trading around the $1,680 lows. That proved to be excellent timing as the surge has certainly been massive:

And last week’s blog “Is inflation – and Gold – about to spike upwards again?” reinforced my forecast.

Thus, my November guess for an upside reversal and my timing were spot-on. Bingo! The next problem is now how to manage the trade. And you can follow my journey from my website and from my VIP Traders Club service.

The breakout of the triangle in early March was another low risk entry and confirmed my Elliott wave count. Gold closed the week at the $2,235 print at a new ATH and a gain of about $300 from November.

To many, this surge is baffling since the dollar also advanced last month. Conventional analysts cling to the standard theory that Gold and the dollar always trade contra. Not true! In times of high inflation and high interest rates – not to mention financial uncertainty – inflation/disaster hedges such as Gold can trade for lengthy periods with the dollar. And I view Bitcoin as an inflation hedge at present and that too is near ATHs.

And in terms of the euro or sterling, Gold has veritably been rocketing!

So how much longer can this in-synch action continue? It appears likely that the dollar will lose some steam up ahead and then its decline can be more fuel for the wave 3 Gold rocket. I am keeping a close eye on the dollar for signs of the reversal.

Incidentally, I know of traders who only trade third (or ‘c’) waves. They patiently search for markets that display early stages of third wave action and take early positions knowing that if they have correctly identified a budding third wave (in any time scale), the move ahead will be vigorous, fast-moving and reach price targets that can only be imagined at the start. Thus, trailing stops can be moved to protect profits. And third waves in commodities have offered the very best price action in history (and waves 5 of 3 offer the supreme best)!

The stock market is not the economy – but still…..

Am I the only one wondering what the heck is going on in today’s crazy topsy-turvy financial world? We keep hearing that Germany as the largest EU economy is on its last legs with house prices plunging and its manufacturing base – long the powerhouse of its economy – in a slump with business confidence weak.

It also bet the farm on renewables that has produced the highest electricity prices in the EU. It is slowly coming to its senses with more gas-fired and nuclear generation but that will take years to undo the damage.

Yet German stocks are riding high with the DAX 40 seemingly on a rocket to the moon.

It’s a similar picture in the US where stocks are melting up wile the underlying economy appears iffy at best. Credit card and car loan defaults are rocketing and now mortgage arrears are rising. The have-nots are truly feeling the pinch.

In the USA with the largest global economy, stock indexes are also making ATHs (ex-the Russell 2000). Retail investors (otherwise known as Mom ‘n’ Pop investors), who are generally a pretty cautious bunch, have finally jumped on the bandwagon set by the pros since last October and are now in panic FOMO mode to own stocks.

Below is the latest chart of their positioning as measured by their expectation for stock advances over the next six months. The ballooning 50% now that are very bullish almost matches the ATH extreme set back in 2018. If you recall, that did not end well for investors.

Note that most of the time, the public are within the 32% and 44% band and that remained steady in both large up and down swings. So a move out of that band is significant. Not only that, but the ascent off the October 2023 low has been ultra-steep with no pull-backs. That, my friends, is a manic panic attack of FOMO in one chart.

And for Elliott wave fans, you can count a pretty five up off the October 2023 low with the final fifth wave highly extended (wave 4 low is on the October low). This is another reason to suspect the end is nigh for the bull run in the indexes.

We know that the public en masse is always late to a new trend and are mostly buying at the top and selling at the bottom. This is reflected in the very same trend of most of the MSM pundits. We know all about the Headline Effect where a strong headline usually appears at or near the end of an established trend (see my Cocoa coverage for a current textbook example).

And boy, do we have some strong headlines running! I recently posted one where the author insisted that every investor must hold Nvidia! It seems it would be a criminal act not to is the implication.

When you see such a definitive headline as that, you know that there lies trouble ahead. Of course, many pundits are ‘talking their book’ in an ill-disguised attempt to draw more buyers in so they can raise the share price to make their quarterly reports more favourable (and hence attract higher fees!).

Memo to all investors/traders: All MSM articles should be read with a degree of scepticism.

Incidentally, When someone has such a fixed ‘can’t lose’ opinion, you know they are a very poor trader, Good traders understand that the future progress of any financial market is uncertain and will admit that. We are dealing with a chaotic non-linear and irrational system that are the financial markets.

You can dig up every scrap of fundamental data on Nvidia (or any other market), interview all the top executives, consult with all economic ‘experts’, and even be in the know to insider knowledge for upcoming contracts (illegal, of course) – and you will not be able to predict the path of share prices to anything close to 100% accuracy.

I maintain that the most effective and time-conserving way to price prediction is by using a solid technical method – and to use proper stop loss provisions. Expert chart readers can sometimes (but not always) glance at a chart and offer a confident forecast (always less than 100%). Of course, the time scale considered is paramount. But that is a whole subject in itself.

I believe the chart above is a warning to expect a stock index reversal ahead. I know I have been saying that for a while, bit I am patient and believe that when the reversal occurs, I can start to reap a harvest that has so far been latent.

Then there is the inflation question, which is front and centre in most investors’ minds.

Here is the latest consumer inflation expectations chart

It follows pretty closely the lagging actual inflation data as considered by the Fed. As expected, inflation has dropped from the pandemic and Ukraine war boosts – but note where Expectations have dropped to – right on a support level (pink). Applying basic chart reading rules, we should expect inflation to bounce here. And if it does, this will show up in the monthly inflation data as the year rolls on – so will that panic investors and cool their FOMO ardour?

The US Leading Economic Indicator is another data set that is showing clear signs of a slowing economy. They have been negative for over a year and this historically has been accompanied by recessions. Most pundits expect either a ‘soft landing’ or ‘no landing’. This chart suggests a ‘hard landing’ to come.

And here is another series showing economic weakness:

And most telling of all, Consumer Confidence has been negative for five months while stocks climbed to new ATHs. Consumers are not positive about the future. But investors are as they keep buying shares in their FOMO panic.

Thus, the yawning chasm between the haves and the have-nots gets even wider. Inflation always does this – it hurts the ‘poor’ hard while the ‘rich’ grow their wealth. But remember, such a dynamic was behind the French Revolution when the have-nots could take it no longer!

The bottom line: In this new permanent inflationary period post the Fed’s QE ‘experiment’, bad news is good. And the badder it gets, the gooder it gets. Crazy, no? Not really. When investors see the value of their savings get eroded by inflation, they look for protection in the form of interest-paying bonds (boring) or dividend-paying stocks (also boring) – or growth stocks (exciting!). Or they hoard Gold (as many central banks are doing, please note).

And what better growth share is there but – you guessed it – Nvidia? Sky-high valuation? No problem. Until there is a problem.

Here is a chart of US Fund Managers’ view of recession likelihood. This is a stunning chart as it shows they have a lower expectation than in 2021 but with stocks trading much higher than then. This divergence I believe is a clear sign that a US recession is very likely. Watch tis space.

The beaten-down Ags are poised to reverse higher

Hedge funds have succeeded – with the trade – in battering the Wheat, Corn and Soybean markets down in the last two years. But the technical picture is shouting loud and clear that major reversals are at hand. While no forecast can be 100% confident of course, I see major profit opportunities this year.

In terms of the fundamentals, carryover stocks for all three are very high (hence the low prices), but a glimmer of light for the start to stock reductions was presented by last weeks USDA Plantings Intentions Report showing that the latest Corn intentions are about 5% below expectations as farmers intend to plant crops with more profit potential.

But here is the stunning chart

Note the lovely 5-wave ending diagonal into the 22 February 4.07 low on a massive mom div. The a-b-c two-year correction appears complete and only a sharp move below the 407 low would deter me from my bullish view.

My first major target is around 5.10 (latest 4.40) with higher potential to upper target around 7.15. These are massive moves and well worth pursuing.

Naturally, early trades may get stopped on small setbacks but if so, I will persist with my campaign and try to buy the dips. But the picture above does suggest a rapid advance is on the cards and I do not want to miss this one. After all, a large La Nina approaches!

Cocoa update

The market hit the Very Round Number $10,000 in a flurry of bullish MSM articles. Thus, I fully expect at least a decent period of consolidation and have banked all profit. So has the Hockey Stick finished growing – at least for now?

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