The US indexes are setting new records, not just in the price levels but in the succession of consecutive up daily closes.  The S&P has closed higher in 11 out of the last 12 trading days – and that is a record unmatched in many years.  And the one down day was a very small one. But does this not strike you as a little odd?  After all, the indexes are in massively strong bull trends especially since the Corona Crash low of March 2020. Consecutive new daily highs after a vigorous advance strongly suggests a buying climax period where the bears have given up and joined the bulls in their headlong desire to buy almost everything that moves.

The degree of conviction that shares can only go much higher must be at or near record extremes.  You see this is the so-called ‘meme’ stocks. These are companies that lose money yet the retail crowd has latched onto them – closely followed by the hedge funds who track Robinhood order flows who sell them that very lucrative data.

When sanity returns to the stock market, these loss-makers will face a reckoning – unless by some miracle they all can find revenue streams unknown to most of us.  Maybe they are all behind the ‘ransomware’ hacks of US companies on Friday?  Now that would be a new business for them. 

The Dow lags the S&P a little but it too has moved above a minor trendline

So this places it at an interesting juncture. It is testing the resistance at the wave ‘b’ high but on falling momentum – and crucially trades still under that May 10 ATH.

In other words, if the market is setting up for a decline, this would be a suitable place to start from.

With everyone on board the rally, we should remind ourselves of the Joe Granville aphorism: When everyone believes something will happen, something else occurs. Yesterday, the US jobs report for June came in with a Goldilocks number – way above estimates.  So with interest rates keeping low and the economic data coming in strong, what could possibly go wrong?

From history (and logic) we know that major tops occur when everything appears hunky dory. And major bottoms are made in the depths of investor depression when all looks lost. 

My best guess now is that the value of the dollar holds a key to what happens next in stocks. It has been moving up off the May lows but now is into major resistance.  But whatever the catalyst, it will likely come out of left field.  One possibility is that with the headlong rush into ‘renewables’, the US national grid may break down and already some brown-and black-outs already are occurring in the intense heat in the Western USA.  Also, a major fail in the global internet system from hacking (for example) could shut global commerce down for a period.

Here is the precarious position of the dollar

Has rallied to the major line of resistance on a strong mom div.  Odds are that it is reversing lower and a reasonable target is the 3-year support line with a decent chance it will break below it.  The euro will move in the opposite direction.

 

Silver is about to shine again

Silver is a tricky market to trade.  But if you can catch the start of a major trend, the rewards can be spectacular.  I believe we are at that point now.

Last week I covered Gold with this chart

The market had dipped to test the Fib 62% support which I believed would hold, and last week it justified my faith by moving up.  But I believe Silver has even greater potential – here is my roadmap

For many years before January 2020, the market traded in a fairly narrow range before finally dipping to the $12 area in the Corona Crash. But that was the springboard for an explosive rally in the commodity sector in which Silver was a full participant taking it to a high of $30 last August.

That jack-in-the-box action out of the sleepy period is a classic response to it.  The years of range-bond trading lulled traders into either ignoring it or just scalping it.  In fact, it was a trend-followers’ nightmare with whipsaws all too common. Interest in trading it vanished.  It took only a small amount of buying to push up prices especially out of the depressed Corona Crash lows.  Most hedge funds were short as they followed the downtrend.  And major short squeezes ensued that resulted in the boom.

Since the August highs, it has been tracing out a classic 5-wave textbook wedge/triangle in a wave 2 (or B). And with yesterday’s 50 cent surge, it appears we are on the way up in wave 3 (or C).  And if my immediate forecast for the dollar is correct, I expect the PMs to conform. 

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Trading the financial markets is not just getting the trend right (difficult enough), but in entering your trades at the right time just as the train is leaving the station.  Entering at a disadvantageous time often results in an immediate loss to your stop even though you have guessed the direction correctly. And trading without a stop is financial suicide.

I was lucky enough to catch the start of the commodity boom last year – and I believe they are now poised to resume their advance after this corrective period.  If you like trading Gold and Silver (and also stock indexes and many other markets), why not join us by taking a two-week Free Trial to my VIP Traders Club here.

If you trade individual UK and US shares, we are trading them in my Pro Shares service.  Take a generous three-week Free Trial to my Pro Shares service here.

 

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