One kind reader chastised me last week for being too verbose in my blog. He wanted me to cut to the chase. So today I am doing just that.
We are at or very near historic turning points in major markets as we approach the next leg in the Deflationary Depression story.
Hard to believe when Gold, Forex and the Nasdaq are making ATHs almost daily, isn’t it?
Yes, it is hard to believe for the vast majority of market analysts and investors. Because they project current conditions into the future using their old ink-stained school ruler. They fail to see that markets are cyclical when all they see is a strong multi-year bull phase. But a glance at a long range price chart should remind them.
And that is why they also fail to see the end coming – and thus fuel the reversals with their selling either to lock in profits or to avoid/minimise losses. With investors at their most bullish in the ‘can’t lose’ state of mind, the conditions are ripe for major ‘surprises’.
All signs of a mania are there with Robinhooders trading modern-day Tulip bulbs. It’s just a question of time before collapse sets in.
GOLD is now the ‘must-have’ asset even for conservative investors
- Has just made $2,000 – a new ATH above the 2011 ATH at $1920
- DSI (Daily Sentient Index) has now reached a record 91% bulls. This is where previous major highs have been made
- Hedge funds remain net long by a record (latest 5/1 long on COT)
- I have yet to see a single bearish article, or even a neutral one. Everyone is all-in Gold. It is even being recommended for pension funds despite it has never produced an income (which they normally require)!
- Silver has not even reached a 50% retrace of its ATH forty years ago! It continues to lag Gold badly. In a real bull PM market, they should both be surging into ATHs.
- Yet it is attracting huge fund inflows – the iShares Silver Trust (SLV) is the most traded silver share in the NYSE and has attracted the largest inflow since 2013. Everyone now loves silver!
US DOLLAR at major low
- DSI bullish sentiment is on the floor at a record low 10% – last seen in 2018 just prior to major bull run.
charts courtesy www.elliorrwave.com
- I have yet to read a bullish article on the dollar recently. All seem convinced the huge Fed ‘stimulus’ will continue to devalue the greenback and push people into gold.
- DSI bears on EUR/USD is at a record 93%
- Is at the end of the fifth wave that will lead to a multi-month savage bear collapse.
- When that occurs, we shall read of the ‘terrible’ condition the eurozone is in with breakup getting closer as the north/south divide widens. Also we will read of dollar strength on higher rates.
Bond yields set to surge
- Nobody expects this. All have bought into the ‘lower for longer’ story as it is now the ‘lower for ever’ one. This only happens after a 40-year yield collapse.
- The Fed cannot continue its support programmes for much longer – they are seeing it is killing the dollar (and raising import costs and not really making America great again). They will be taking away the punch bowl soon.
- US corporate borrowing is surging with a 31% increase in four months (to a staggering $6.75 Trillion). When rates start to rise, many corporations will be forced into bankruptcy from the rapidly increasing expenses from their huge debt loads. Combined with the current pandemic-induced revenue cuts (except for the favoured FAANG Gang and its cohorts), this will be the death knell and many businesses will be following Hertz.
- Treasury yields are at historic lows and everyone expects that to continue for ever. What ideal conditions for a ‘surprise’? What if the Fed hints it may cut back on its buying as the economy improves? That will send shock waves through fixed interest!
Stocks also at major turning point
- Madness surrounds the retail sector with teenage Robinhood traders ruling the roost. Their trading patterns are being amplified by the large funds who buy the order flow data and front run the youngsters. Nice work if you can get it.
- They not only trade bankrupt shares and run them up but are now into the shares of Kodak, a former Dow giant which is now a (solvent) minnow. They have secured a contract to manufacture low margin generic drugs formerly made in China and India
- How do you like that hockey stick for a sharp 3,000% rally? Sheer madness.
- For the adults trading more or less rationally, the top handful of stocks are still the generals leading the charge up the hill. But the foot soldiers are getting tired with the majority of the 500 issues in the S&P 500 in bear trends. In fact, only the US indexes are in bull trends globally. All major foreign indexes are lagging the US badly as they are currently trading off the dollar movements.
- Here is just one – Facebook
- It is in the final fifth wave and creating a possible ‘overshoot’ which a sharp pull-back would confirm.
If you agree with me that markets have become too stretched and are due for major corrections that will last months. And if you believe me when I say we are in a Deflationary Depression and that asset prices will decline for the next two years (approx), you need to follow the major market moves up ahead with me.
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