So, did the euro tank, as the pundits forecast?

So, did the euro tank, as the pundits forecast?

Memo to pundits:  Keep up the scare stories, guys.  You are doing us a world of good!

True to form, the tsunami of gloom-and-doom forecasts last week for the euro if Italy voted No (as they did in droves) produced the desired effect – it rallied!

Here is one typical example from a promotional email I received

“The pro-EU Prime Minister promptly announced his resignation after the crushing defeat. A surging populist party waits in the wings. They’re now likely a matter of months away from taking power, and then holding a new referendum on whether Italy should dump the euro and go back to the lira. If that happens, Italians will likely vote to leave. Without Italy, the euro currency would likely disintegrate. Without the euro, the whole European Union—the world’s largest economy—would likely come unglued.

“More immediately, I expect the euro to tank this week.

“If it breaks below its March 2015 low of $1.046, it would pave the way for it to test parity with the US dollar (which hasn’t happened since late 2002). If that happens, look out below.”

As I stated last time, a No vote was not an automatic path to riches by shorting the euro for the reasons I gave.  Because bullish sentiment was already AWOL going into the referendum, odds were high that whatever the result, the euro would rally.  Mama mia!

I did not read a single forecast that the euro would rally on a No vote – did you?  All of them (and I did read many), forecast a continuation of the decline.  The very excited ones  were even calling for parity with the dollar (as did the above).  With my Headline Indicator pushed hard to the right, a low risk trade had to be against this consensus.

In fact, this counter-consensus move yesterday was the exact mirror opposite of the euro’s reaction to the Donald’s victory November 8.  Here is the 4-hr chart:

The Trump Bump kicked off the lovely five Elliott waves down with the pretty momentum divergences to the fifth wave low at ticks above the 1.0500 level.  Again, the pundits got it 100% wrong as now the market is trading three full points up in the Renzi Rip.

To me, Monday’s surge is impulsive – meaning the one lager trend is now up – and the short term waves confirm this.  Here is the 30-min

I have a conventional waves 1 and 2 and wave 3 has the required ‘long and strong’ trademark pattern.  Now we are in the process of making wave 4 (which could be complex) – or even extending the third wave.  With the shorts now on the run, an extended third wave is a distinct possibility.

So thanks, pundits/experts – keep up the good (bad) work!


Gold – is it now ready for that huge rally phase?

The decline since the Trump victory has been relentless – losing $160 in only four weeks. Much selling has been done as retail investors are jumping out of gold and into dividend-paying shares.  November saw one of the highest redemption rates for gold ETFs in history. Because retail investors/traders are usually the last to throw in the towel in a strongly adverse move, that clears the way for the professionals to scoop up the ‘bargains’ and impose a short squeeze on the trend-followers.

The market has declined right to he Fib 62% retrace of the entire year-long rally in a clear A-B-C (counter-trend) with the C wave particularly long and strong.  Here is the daily:

The key point is that the market is now testing that Fib level and on a large mom div, which means the selling pressure is weakening – the ideal set-up to start a strong rebound rally.

With bullish sentiment on the floor, the recovery rally could kick off at any time – and what an ideal time to squeeze the shorts mightily would be around next week’s Fed meeting where they will announce a rate increase.  This would confound the pundits (again) who believe that a rate increase is always bearish for gold.

Yes, read what the experts and gurus say and profit (by doing the opposite!).

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