The Final Countdown: November 30, 2015

The smallcap indices ($RUT-Russell 2000 & $SML- S&P 600 smallcap) led the way this week even though they are still not close to their previous highs made back in June 2015. The $RUT is not even over its 200 week moving average yet. The NDX 100 and Nasdaq Composite indices did not lead the way as you would like to see in a healthy market and their big move off the August bottom has really been based on only a relatively few big stocks and most of that move was based on big jumps on well received earnings reports instead of a broad based moved by the market as a whole.  Earnings in general have declined for the 3rd quarter in row and much of the earnings improvements that exist have been based on stock buybacks, in many cases funded by cheap debt.   Retail sales have been a major disappointment across all levels from the Macy’s to the Walmart’s. Malls have been relatively empty for some time now with more empty retail spaces due to stores closing. The global economies as a whole have been slow for quite some time now with the Baltic Dry Index trading near all-time lows. The Baltic Dry Index is a good indicator to follow for the health of the world economies since it is not a government manipulated number, I mean not released by any government. So what is keeping this market up, the central banks with their funny money as well as those who have direct access to the cheap debt provided by the big banks. Another factor is the low interest rates that force major institutions, particularly pension funds to invest in the stock market in an effort to make a reasonable return that is not being provided by bonds.

When the stock market broke down in late August, the stock indices blew through their 200 week moving averages. This was the deepest penetration below this standard during the entire bull market dating back to 2009 for the stock indices, especially for the NDX 100 and the Nasdaq Composite. The NDX 100 and Nasdaq Composite typically lead a healthy market up and when things go bad they lead on the way down as well. Such a deep penetration below the 200 week moving average at these high levels and after a 6.5 plus year advance combined with the weak economic fundamentals should be a serious warning sign that not even the Federal Reserve and its merry band of market elves can keep this hot air balloon up at these elevated levels for much longer. The general U.S. economy has never really been in recovery since 2008 and the parts of the economy that have shown any sign of growth have been financially engineered, or are dependent on historically low interest rates, or are highly dependent on pockets of overseas sales or are in the pharmaceutical/biotech drug sectors or have low cost products that people need or are in the high end sector. These areas are starting to show serious signs of wear and tear.

I think it is very possible for the general market to continue up for a week or two more but then either start to display a range bound topping pattern or start to roll over. I think you will very likely start to see a rotation into selected emerging markets within the next 2-4 weeks. Emerging markets were weak and down this past week. I expect this to continue for another 1-3 weeks as we sort through the IMF SDR meeting this week and whether the Chinese Yuan is added to the SDR basket of currencies. If the Yuan is added to the SDR, then it will probably take some time for the market to determine its effect on the Chinese stock market. I do expect it to have a positive effect but probably not immediately this week. The China ETF, FXI, looks likely to continue to fall some more before it bottoms. Also, Russia has been in the news this week with the geopolitical conditions in the Syrian terrorist war becoming more complicated due to Turkey shooting down a Russian airplane. Brazil’s economy is terrible and they have political issues mixed in with the economic problems. But if energy prices start to show serious signs of bottoming, then these latter two countries and their markets could start to improve rapidly. Sugar has also started to show some strength recently. Foreign investors have also started to move into Brazil and take advantage of some bargains in buying businesses and making investments as stated in a Wall Street Journal article last week. If the U.S. stock market starts to roll over, then that money is going to look for other places to put it. Bonds offer no return and very high risk due the highly indebted governments of most developed countries. Russia’s government has low debt compared with almost any other country with a significant economy, which is another thing in its favor. Russia also has reasonably capable leadership, especially when compared to the U.S. and Europe. The Russian and Brazilian ETFs are RSX and EWZ, respectively.

The dollar continued to edge up last week and with the ECB and its head Mario Draghi ready to provide some more stimulus in the near future, it looks likely to head lower. As Michael Pento pointed out in an excellent interview with King World News this weekend, the dollar index is the dollar being compared to a basket of 16 other currencies with the Euro making up 58% of that basket. So with the Euro poised to continue its downward trend due to more paper money printing (it’s mostly created digitally, which makes it much more efficient to screw things up), I mean economic stimulus (that sounds much more substantial doesn’t it), the dollar will continue to rise. And with the dollar continuing to rise, then precious metals will continue to fall. The precious metals had a pretty big move down this week and look poised for significantly further downside. I think gold could go to below $700. The article from Zeal LLC that I referenced a couple of weeks ago, said the cash costs of producing gold for the 34 top gold miners in the ETF GDX, was about $675. So I think you could see it go below the cost of production and where these miners would actually start losing money on a quarterly basis.

Junk bonds as represented by the ETF JNK look terrible and significantly more downside is probable from here. The 30 year Treasury yield and the 10 year Treasury yield as represented by the ETFs TYX and TNX have been consolidating and holding on to their prior gains for the most part. They look likely to continue their prior, recent strength at some point in the not too distant future. If they stay in the same range as they have been over the last few weeks by the mid December Federal Reserve meeting, then I doubt that the Fed will raise rates. But if rates start rising significantly before the meeting then the odds would change.

The Changing of the Guard: November 21, 2015

The stock market (defined as those instruments listed on the U.S. exchanges) is starting to depict the changing realities of the major players on the world stage. The U.S. specific indices are starting to show serious signs of wear and tear at extremely high levels (based on price, valuation, and economic fundamentals) and are being supported by a relatively few big NDX 100 type stocks while the market ETFs of Russia and China have started to show some strength from relatively low levels. The Russian ETF, RSX, demonstrated significant strength on good volume last week with a rise of 9.20%. The China ETF, FXI has rebounded from its late August low after going on a huge run-up that you could say started in the first quarter of 2014, peaked in late April 2015 and virtually retraced its entire run-up on the downside within four months. For the last four weeks, FXI has been in a stair step retracement of that rebound and may make a double bottom within the next few weeks.

As long as we have big governments (the less government the better), the quality of leadership demonstrated by that government is going to have outsized effects on the economic environments of the respective country as well as on the social fabric of the country. A country that has spent gargantuan amounts of fiat money (they got away with doing this for so long because they had the world’s primary reserve currency, had little global competition due to world war II and the state of world during this time, while they ran the country’s real economy into the ground) on their unaudited and crony based military-industrial complex with practically no public or representative oversight. The world has changed with major new players who are proving themselves adept at greatly improving their economic performance or are quickly coming up to speed on how to greatly improve their economies. They want to be left alone in large part so they can get on with the task of improving their economies without the outside interference of the historically aggressive and violent attack force called the U.S. government.   This is not to say that any of these governments are practicing what could be called Capitalism but they are staying out of the way of the businesses and people in the respective countries enough so that significant economic progress has been achieved or is on the verge of being achieved. These countries understand, after repeated attempts, that the word collaboration, is not a word that the U.S. government understands nor wants to involve themselves in. The U.S. government and their fascist cronies intend to rule, command, and immensely profit by enveloping and commandeering new serfs, slaves, and vassal states within their web of destruction, deceit, and profit for a few schemes/scams, even at the expense of everybody else.

Russia has emerged on the world stage this year as a formidable power that is demanding respect from the U.S. hegemonic regime as well as demonstrating the resolve and ability to protect its own vital interests, all within the constructs of international law, unlike the out of control U.S. fascist tyrants. Putin has shown great statesmanship as well as the ability to show his words should not be taken lightly or mistaken for weakness. Putin has tried to collaborate and offered an olive branch on a number of occasions in an effort to work out differences between the interests of the U.S., its European vassal states and Russia but has either been rejected, undermined, or taken advantage of each time. Putin not only is a capable statesman and leader (as far as big government politicians go), but has an understanding that his country must develop its economic interests if his government is going to be sustainable, which includes providing economic opportunities for the Russian people. For lack of a better way to put it, Putin appears to have developed a deeper respect and understanding for the human condition, people in general, and Russians in particular than the U.S./Western developed nations leaders and fascists who think everybody else is expendable and we are only here to further the cause of the elite agenda. This rise and change within Russia and the world at large is starting to be reflected in the financial markets as the Russian ETF RSX, increased 67% from November, 2014 to May, 2015 despite sanctions being place against their country by the U.S., Eurozone, and other U.S. vassal states. RSX has slowly retraced that initial gain somewhat but in the last few months has started again to show signs of strength.  The stock, YNDX, which is often referred to as the Google of Russia, has increased 76% off its late August low and continued to show good strength last week on above average volume. RUSL, is a 3X leveraged ETF for the Russian stock market for those who choose to be more aggressive in taking a position in the Russian stock market.

The Russian economy is largely based in the natural resource and commodity sectors, which have been stomped on by the markets over the last few years, yet the Russian market ETF has performed rather well over the last year. Russia has large agricultural capabilities and the agricultural commodity sector may be showing signs of coming close to a bottom. I have seen insider and elite hedge fund interest in this sector while insiders and hedge funds are quickly exiting stocks in high priced sectors like the NDX 100 type stocks. I believe the agricultural and energy sectors will be the first commodity and natural resource sectors to bottom since there is always a strong base demand for those products despite what the lackluster condition of certain economies or global trade in general may be. People always have to eat and our way of life is so dependent on the use of energy with the greatly expanding demand from emerging countries that despite bad economic conditions, these products will always have a reasonably constant and strong demand.   And supply of these resources is somewhat limited, especially in the energy sector. With the ongoing demise of shale oil due to low oil prices, oil price hedges expiring, the relatively expensive, short-lived wells not to mention environmental concerns in populated areas due to possible contamination of ground water, and the inability of Saudi Arabia, due to budget and monetary reserve issues, to continue to oversupply the market, oil prices should start to rise by the end of the first quarter of next year.

I am not recommending the China ETF, FXI yet. The Wall Street Journal (WSJ) had an article the week before last that the IMF was going to include the Chinese Yuan into its SDR basket of currencies at its upcoming end of November meeting.   The article stated that the U.S. had removed any objections that they may have had and that Christine Lagard, IMF Head, was in favor of its inclusion due to the recent moves the Chinese government had made to make its currency more market driven by its de-pegging from the U.S. dollar and continued efforts to open its financial markets to global investors. Another article in the WSJ from the same timeframe said that Chinese companies were going to start being included into MSCI Emerging Market indices. Half of the companies were to be included in the indices at the end of November 2015 and the 2nd half of the companies would be included in June of 2016. These moves will create more demand for Chinese stocks but I do not think the China ETF FXI has bottomed yet. I think we will have to wait until after the Yuan is added to the SDR at the end of November before the Chinese market bottoms and the market participants ascertain what that means going forward. But I do think these moves will soon have positive effects on the perception of the Chinese stock market as being a place to deposit money. The Chinese market is trading at levels and in a range that dates back to June 2009 so China is not an elevated, overly high priced market, especially when compared to the artificially inflated and hot air balloon called the U.S. stock market. China is still one of the few major world economies exhibiting significant growth even if their official last print of 6.9% is a figment of a committee of bureaucrat’s imaginations.

So the world is seeing a changing of the guard from the unipolar world of the U.S. government and its tyrannical, hegemonic regime which includes its band of bought off and/or coerced vassal states to a multi-polar world led by Russia and China and other emerging countries who want to be free to pursue their own economic interests, in a collaborative manner where it makes sense to do so, without paying liege to this tyrannical, self-perceived overlord. This is happening right now, as we speak, and this trend is quickening so that it will not be long before it becomes obvious things have seriously changed, even to the most indoctrinated true believers and to the oblivious, nothing is ever going to change crowd.   With or without your understanding, this change is taking place and U.S. will be forever changed by what is getting ready to occur on its own soil as well as in the world around it. The U.S. government days as reigning kingpin of the largest criminal gang in history are about over. It was all built on its creation of the Federal Reserve central bank (that allowed it and its big bank creators (along with the fractional reserve banking) to possess a monopoly to provide themselves all the money they wanted out of thin air, which gave them extreme and extremely undeserved power and profit) as well as running the biggest and best economy history has ever known into the ground and turn its citizens into serfs, foot soldiers for the regime, and targets to take advantage of or to suppress. Central banks are not part of capitalism. They give those (government, big bankers, and big corporations who receive much of the largesse from the big banks and governments) who control this artificial printing press of money extreme and undeserved power over others. Those who hold this power have proven themselves to be very destructive, violent, overly aggressive, and arrogantly disdainful to the rights of the common person. Small and medium sized business sectors have been greatly diminished with the private sector middle class largely devastated by the power of the big guys who hold and purposely keep all the power in their hands with whatever means necessary.  Big changes are occurring in the world right now but whether they end up being great changes for the future is primarily up to the people, not to these corrupt, criminal governments.

All signs point down for precious metals. I think we will see a good run up in selected emerging markets over the next few months without the precious metals participating in that run. So this will give plenty of time for gold and silver to continue to work its way downward. Most major gold and silver companies are making decent to good money at the current gold and silver prices based on their cash and all in sustaining costs (ASIC). Yes, some companies bought mines and mining rights near the top of the market and are thus saddled with high debt loads forcing them to find ways to manage it. A good article by Zeal, LLC on the earnings of major precious metals miners said the average ASIC was about $875 after the 3rd quarter, so I think you will see gold and silver prices go below the cost of production before you see a bottom. I think gold will go significantly below $875 based on the current price, the current trend, the amount of time required for emerging markets to make a run, and where significant support exists in the gold market. This continues to mean that the U.S. dollar will probably continue to rise.

Market Analysis: November 15, 2015

The U.S. stock indices had the pullback last week that I had been expecting and it looks like it will probably continue into this week. By the end of this week we should have a good idea of whether the bottom is in or not. If you have been stopped out of your positions during this down draft, then I would wait till you see signs of a bottom and then look to reposition yourself in your chosen stocks. This pullback is really healthy if the market is to continue up as the big move up off its September bottom was getting overextended and needs to digest its recent gains. The reversal in this area was to be expected as the indices were entering the area of prior highs and this presents a resistance area for further up movement albeit if only temporary in nature. Although the Nasdaq 100 and Nasdaq Composite indices have led this up move off the September lows, the Nasdaq Advance Decline line is nowhere near approaching its June levels even though the indices have either exceeded or approached their June highs in price. This rally is very thin in breadth even with the Russell 2000 index starting to play catch up somewhat a couple of weeks ago. The Russell 2000 has still not come close to approaching its June high yet. This pullback has been a very strong pullback which I think is largely due to the weakness of the underlying market and its current economic conditions.

I see agriculture coming close to a bottom. I have been looking at it for a while but I took an extra look this week after reading the Jim Rodgers interview in Barron’s last week. I have somewhat mixed feelings about commodities right now as they are getting very cheap but until the U.S. dollar rolls over, I do not see huge upside. That said, some commodities could bottom before the U.S. dollar rolls overs and agriculture could be one of those commodities since food is always in demand no matter what the economic conditions are – people always have to eat. POT, MOS, and IPI are fertilizer stocks I have been following and think will benefit sometime in the not too distant future.

Oil (Light Sweet Crude) closed down almost $4.00 last week and closed at $40.73. It is approaching its August low of $37.75 which is an important point. If it seriously breeches this level then more downside could be in store. For old school technical analysts, a head and shoulders patterns has formed on the chart and portends a price $15-$20 lower from this area. I think that it is highly unlikely even with all the reports of oil tankers lining up offshore the U.S. waiting to unload, lines of tankers being sent out from Iraq to the U.S., and the prospect of Iranian oil coming on the market. I listened to an interview of Swiss/Singaporean financier Carlo Civello on FutureMoneyTrends.com and to paraphrase what he said. He said that the amount of oil being produced that is resulting in these low prices is not that much more than the amount of reduced production needed for oil prices to go about $30 higher from here.  And that once the oil price hedges of the fracking companies expire near the end of this year, then that would likely contribute to higher prices as these companies go out of business. So while I do not see any imminent sustainable upside reversal here, I do not see oil crashing way lower from here either. Again, as long as the U.S. dollar is strong, I do not see significant upside to oil.

The U.S. dollar held on to most of its gains from the week before last, so the dollar looks good for further upside from here. This is not good news for gold and most of the commodity/natural resource space. Gold is considered the Anti-Christ to the U.S. dollar and its position as the world’s primary reserve fiat currency so they move inversely to one another. Dollar strength should lend some support to the U.S. equity markets as foreign investors look for exposure to U.S. dollar assets as a safe haven.  But there is no real safe haven in any paper asset market in this world of hugely indebted developed nation governments including the perceived almighty U.S. government. Having the largest and most meddlesome military (and government in general) does not qualify you as a financial safe haven. To the contrary, it makes you even weaker on a financial basis and the cracks are certainly starting to appear in the U.S. economy as well as the well-being of the U.S. population at large due to its predatory government and its fascist system.

Junk bonds continued to fall hard last week as represented by the ETF, JNK. 10 and 30 year treasury yields, as represented by TNX and TYX, held onto their gains from the prior week so the prospect of higher interest rates as well as continuing deterioration of economic conditions would not be unexpected. Higher rates would contribute negatively to an already weakening economy that is significantly based on low interest loans as well as greatly increase the interest service charges on the U.S. government’s huge and ever-expanding debt. The Fed does not want to raise rates knowing all this but will likely be forced to by the market at some point. If the Fed refused to raise short term rates while long term rates continued higher, then the Fed would appear to be not in control of rates (which is true as the market ultimately determines where rates will go) and that would likely lead to even worst market reactions sooner (it is going to end badly no matter what the Fed and the other central banks of the world do, at this point it is just a matter of how long they can extend and pretend all is well).

Market Analysis: November 8, 2015

The U.S. stock market continued to move upward this past week with the Russell 2000 index leading the major indices higher this week with a gain of 3.26%. This may be a case of the small-cap stocks playing catchup to the NDX 100 and Nasdaq Composite which have been leading the pack upward over the last six weeks. This is a healthy sign to see broader market participation from the smaller companies in this upward leg. A couple of Nasdaq 100 heavyweights, Facebook and Tesla, had positive responses to their earnings reports this week helping to propel the Nasdaq indices higher this week. Based on the market’s continued upward momentum throughout this earnings season with broadening breadth, it looks like all systems go as the we have just entered the best seasonally 3 month period (November, December, & January) for the stock market. As I said last week, I am still looking for a short term correction in the VIX and the stock market indices to help the market digest its recent gains and provide sounder footing for continued upward movement. The major indices (NDX 100, Nasdaq Composite, S&P 500) have reached the areas of their pre-August correction highs with the NDX 1oo having already exceeding its previous high this week. So this previous high area should provide some resistance to immediate moves higher and is a likely place for the general market to take a breather before it decides in which direction to move. Indications now point to further upward movement but it is always imperative to have a stop loss strategy in place to protect yourself from unexpected losses. Correct position sizing is part of a good risk management process as well.

The jobs report on Friday sparked a big move up in the U.S. dollar as the report surpassed analyst estimates for job growth and was positively received. The dollar has been showing continued strength over the last few weeks and is now approaching its early March 2015 high of 100.785. The dollar’s strength should also help support the U.S. stock market as foreign investors will want exposure to strengthening U.S. asset markets. Interest rates also spiked up on Friday and the 30 year rate as represented by TYX (30 year Treasury Index) is testing a trendline that dates back to 12/30/13. If the 30 year bond interest rate breaks out past this trendline then significantly higher rates can be expected from here. Rates would probably revisit the highs where this trendline started which is at 3.976% and then probably go to around 4.35% from there. As per TYX, the 30 year bond rate is currently 3.089%.

The near zero fed fund interest rate since the start of this bull run back in 2009 is anything but normal and is certainly not a sign of a robust economy.  Interest rates have been kept at an unprecedented low level because neither the extremely indebted U.S. government nor their crony, overleveraged big bank partners can afford for rates to go any higher. But at some point it is likely that the market will push rates higher and this could be the starting point based on Friday’s move. We will have to wait and watch to see what rates will do from here. If rates do continue higher from here, you can bet that the mainstream media will portray it as a sign of a strengthening economy and based on expectations that the Fed will raise interest rates in December or whenever. But it is the market that will decide where the rates will go in the end. While all Treasury holders are closely aligned in their interests, then the Fed as the purveyor of the world’s primary reserve currency (U.S. dollar), has great sway and control over the Treasury interest rates. But as the interests of major holders of Treasury debt diverge from the interests of the Fed and U.S. government, then the market will begin to take control of where interest rates go. The Fed can continue to print more dollars to buy newly issued U.S. government debt if there are no other buyers out in the market but at some point that will start to devalue the dollar. And then there are the dollars that are provided to buy Treasuries from holders looking to exit their position. All these newly printed or provided dollars will eventually come back into the U.S. economy. Complicating or compounding things are reports that the Chinese Yuan currency will be included in the SDR basket of currencies in the next few months which would mean that many central banks/banks will exchange some of their dollars for yuan creating further downward pressure on the dollar and probably contribute to higher Treasury rates as well. The Fed’s control over interest rates remains as long as the dollar is the primary world’s reserve currency and the holders of its Treasury debt have closely aligned interests.   The lessening of the World’s need to use U.S. dollars in their own commercial transactions decreases the ability of the Fed to control its own destiny and increases the repercussions of any Fed policy and action that does not represent the interests and reality of the market as a whole. Another consideration is that major Treasury holders, such as China, Russia, and others have probably been selling their bonds and have been buying gold with a large portion their Treasury proceeds. As long as these foreign buyers of gold can get gold at these fire sale prices and use their worthless long term Treasuries to buy them, they will not call out the U.S. government and the other heavily indebted Western governments on their insane pyramid scheme. But when there is no more gold to be had at these insanely low prices (considering the economic conditions and western government debts that prevail) that will be game over for the U.S. stock market rally, the U.S. dollar as the reigning currency, and U.S. global hegemony (no more empire).

But that day is not here yet and the market looks poised to continue upward. As I said last week SPWR and FSLR, both in the solar energy sector, look ready to continue their upward trajectories and did last week. There is still plenty of room for these two stocks to run up. FLEX is an electronics contract manufacturer with a recently acquired solar unit which had a well-received earnings report about 3 weeks ago and has pulled back and now looks ready to continue upward.  BABA has had a nice run off its recent low in late September after a positively received earnings report and is at resistance now. I expect further upside to this stock but it may rest in this vicinity for a week or two. FEYE had a poorly received earnings report this week but since this stock is in the highly watched cybersecurity sector and is purported to have the best in its class cybersecurity product on the market, I think it bears watching. It does not have positive earnings although it does have very high growth in revenues. A typical top of the market story stock if it starts moving upward. RHT and VRSN have shown good price appreciation since the late August swoon and look poised for higher prices. RHT has approached its June 2015 high so it will probably rest here for a week or two. NANO is a smallcap that looks ready for higher prices after a well-received earning report. Financials, particularly banks, spiked up on Friday along with the spike up in interest rates. Their profit margins will expand on their loans versus deposits interest rate as interest rates rise. CIEN looks good for higher prices from here based on technicals and has a solid business.

Gold spiked down on heavier volume last week with silver following in its tracks. Gold may rest in this area for a week or two since it is at recent support prices. But I expect another sharp downward move from here to the 1000 area in the not too distant future. If you thought recent prices in the precious metals mining shares were bargains then I think you will be even more pleasantly surprised at the upcoming bargains in the next few months.

Market Analysis: November 1, 2015

Note: This post was delayed due a problem with my website that needed to be fixed for this post to be published.

I am getting more cautious here for a number of reasons. The VIX has not reversed itself, which would have meant the general stock market would probably have had a healthy correction before continuing on its uptrend. The VIX instead has continued to grind lower and approach prior levels that either lead to a slow grinding, slightly upward biased range bound move or to the extremely sharp correction that we had in August. Neither of these outcomes provided many reasonably managed opportunities for profit, particularly in individual companies. The big NDX listed companies of Google, Microsoft, Amazon, and Apple have spurred most of this recent up-move primarily based on well-received earnings reports. I think most of upward potential for these stocks were expended on the big pop ups they experienced in reaction to their earnings report. They probably will continue to move higher over the next few weeks but I do not see this as the start of any longer term trend up at this point. Facebook and Tesla report earnings this week, November 4th and 3rd, respectively.

The Biotech Index, IBB, looks to have topped during the week of 7/20/2015 and has not participated in this recovery rally in any significant way. The smallcap index, Russell 2000, has not participated in this last leg up either. This has not been a broad move up and has been recently due to the positive reactions of the earnings reports of a relatively few stocks in the Nasdaq 100 index.

The Wall Street Journal reported this week of very large equity inflows during the last reported period in October. This indicates that the sentiment is obviously turning bearish when very large numbers of market participants demonstrate they are bullish (no one left to buy when everyone is bullish). These market participants are not only being mislead by the recent big move up but they do not have anywhere else to go in an effort to seek a reasonable return. The return-starved pension funds cannot make a decent return in the bond market with near zero interest rates so with the recent up move they are easily convinced to put money into the stock market. Hedge funds, too, are forced to put money in the stock market if they are to have a reasonable chance to collect on their 20% or so performance fees. In addition to the zero or near zero interest rates on sovereign bonds in many regions, two of their favorite carry trades were eliminated when the Swiss Franc and Chinese Yuan were de-pegged from the Euro and Dollar, respectively.

At these elevated market levels, both in price and valuation, and after six plus years in a bull market, caution is warranted. Use stops on all positions and be careful of earnings dates for your stock holdings. Adding to the market risks, are the continued poor economic reports being released as well as disappointing future guidance on many earnings reports. GDP was released this week and was reported as 1.9% which was a big decrease from the previous quarter of 3.2%.

The unemployment rate is so low because they do not include people as unemployed who are unemployed but have not looked for work within the last 4 weeks (because there are no jobs to be had) and many companies are getting around the costs of the Affordable Care Act by reducing full-time positions and hiring more part-time workers creating the illusion of more jobs being created. Many people are working 2-3 part-time jobs to make ends meet. Over 45 million (from Matt Trivisonno’s blog) are on food stamps, larger than the population of many large nations.   CNS.com reported in early October that the labor participation rate had hit a 38 year low with a record 94,610,000 people not in the labor participation force (and that does not include the government employees) with an increase of 579,000 in August.  Many companies are borrowing money to buy back their stocks because that is the only way they can show earnings growth (earnings are spread over fewer shares, thus increasing earnings per share). These are not signs of a growing and healthy economy.

The gold price also started to turn down last week on higher volume. I believe this is the start of a swift move down to below the $1000 level to probably around $955, where significant resistance exists. This type of move could occur over the next 2-3 months. This move would also take the gold price below the psychologically significant level of $1000 that would probably scare some weak hands into coughing up their gold holdings. Media may latch onto the gold weakness at that point and point to it as a sign of a strong economy, strong government policies, the lack of utility for holding gold, etc – all of it BS intended to mislead the public and feeble-minded investors. If this is the start of a move for the gold price to decline below $1000, then we are probably beginning what is called the capitulation phase.  This should be a quick, scary move down before a bottom is made from which we should see a strong move up. It could be a “V” bottom or a double bottom which will take longer before a move up begins. This move down for gold should mean that the U.S. dollar show strength at the same time as the dollar and gold are typically inversely correlated.   This also means that the dollar should also reverse strongly downward if gold reverses it downward move to a strong up move. When this happens, this in my mind is when more obviously bad things are going to happen to the economy that cannot be hidden with positive spin mainstream media reports, massaged government economic numbers, or government/central bank pronouncements.

This does not mean there will not be investment opportunities in the stock market. In fact, due to increased volatility, currency moves, and probably rising interest rates, there should be several opportunities.   That does not mean you should have most of your money in the stock market. As I have said in earlier posts, I would have a significant proportion of your assets in physical gold and silver. I think natural resources, commodities, precious metals, and selected emerging markets should have significant moves in the coming market environments. Some of my stock recommendations in these areas are already performing well such as Alibaba (China) and Yandex (Russia). I still think, in general, the before-mentioned areas still have some more bottoming to do although Natural Gas is starting to look interesting here. My cybersecurity and cryptosecurity stock recommendations have not done well. Two, Akamai and Rambus, had bad reactions recently to their earnings reports. Another one, Fireye, has not done well and reports earnings this week. I am still going to keep an eye on these as their cybersecurity and cryptosecurity products are either doing well or attracting much interest from potential customers. Cybersecurity is still much in the news as a cybersecurity bill is currently being run through Congress. My solar energy recommendations, Sunpower and First Solar had positive reactions to their recent earnings reports and look poised to continue to their moves up.