Starving the Beast -- Revisited
The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, December 19, 2016.
The globalists want to install Chinese style communism in America, and all around the world, as they are convinced authoritarian control of the proletariat will sustain 'the party' - the status quo. At least they want to believe that, because conveniently such a manifestation might maintain their 'materialistic world' slightly longer, which is of course why this movement has the support of the statist (global) corporate estate. This is why you see the likes of a Facebook betray the interests of its users in favor of 'the state', because those involved think it will bring themselves more material things (or even just more digits on a screen that are just a concept) - being the 'deep people' they happen to be. This is why I don't have a Facebook account and never will. If you like living in a fascist state use Facebook. And if not - stop. You don't need them.
This is the way one should approach things these days, where we have many monsters to tame that have been allowed to grow. And 'starving the beast(s)' is one way you can make a difference. Attempt to model your life in a manner in which you desire to exist. So if you are conservative and desire the pursuit of life, liberty, and freedom - act accordingly. What's more, the sooner you start thinking and acting this way the better, because although the forces working against libertarian thinking appear to be losing, make no mistake, they will never stop tying because they're 'nuts' - in a word. And moving forward it will not get easier as the economy(s) continue to break down, and the decentralization process accelerates. Don't fear this change - embrace it - because it will come whether you like it or not. Thinking in terms of increasingly smaller economies and adapting to this reality is the future.
And this is what will ultimately be the undoing of the dollar($) eventually, perhaps beginning in earnest next year if the count shown in Figure 1 below proves accurate. Right now, the $ is rising because of excitement associated with the Trump Effect. The Donald is coming out of the gate strong, and this momentum can carry well into next year, if not longer. However if anything goes wrong, like rates rising too fast, or the Washington power structure blocking his proposed tax cuts, the party could be over sooner rather than later. What's more, it should be understood the global decentralization process is what will make the $ fall eventually as the periphery players / foreigners increasingly attempt to return unwanted currency in a world no longer US centric. This might not have been a problem back in the 60's, but it is now as America's chief export is its paper. (See Figure 1)
So again, although anything can obviously happen, still, in looking at the count above, although a more complex subdivision is possible, and even without this the $ could still move to 120 off a simple progression, it could just as easily end early next year as well. This would mean gold might not plunge through the 'trend definer' identified below on the monthly. That said, we are only six-months into this wave, where if it were to match wave a, it would still have another three years and hundreds of dollars to run. (i.e. note the MACD and stochastics are just rolling over now.) Of course the way events seem to be unfolding faster these days, as economies implode from within, an accelerated outcome could be the result this time around as process takes its course. You would never know this from looking at stocks going up and gold down right now (what could possibly go wrong), however as discussed previously this will all change going into next year. (See Figure 2)
One thing is for sure however, if gold's price is too rise as a function of market in the current environment of every increasing paper alternatives, the gamblers will need to get a great deal more respectful of risk - that's for sure. Otherwise gold will not rise with the machines continuing to fleece idiot speculators that are so psychotic they are completely unaware of what they are doing in continuing to play the bankers game. Case in point, the latest COT Reports for gold and silver show a complete lack of respect for risk with silver speculators back in accumulation mode right in front of a Fed Meeting a monkey could have figured out was going to be unfriendly. I mean how stupid can you be? Answer: Stupider - because it's other people's money.
The people giving these funds their money to manage deserve what that are going to get because even after Thursday's drubbing, with silver down a whopping 6%, Comex Silver Open Interest (OI) went up - suggestive further substantial losses lie ahead because these meatheads continue to 'buy the dip'. It would be an entirely different thing if these idiots were buying physical for the long-term, taking real supply off the market. This is not the case here however. This is just reckless hedge fund managers gambling with other people's money attempting to strike it rich, which is why they play silver, because it's such a powder keg eventually. Unfortunately for these knuckleheads, most of them will never make a dime in precious metals, because they won't go up until the disease that plagues this market is eradicated. (See Figure 3)
And this goes for the shares too, where if US price managers don't remain ahead of the curve, meaning maintaining the economy's bubble dynamics today, all hell will break loose, credit will contract, the broad market(s) would crash, and so would precocious metal shares, especially the juniors. (See above.) You have to know that just as the Dow is going above 20,000 soon, unless some degree of hyperinflation is unleashed on the economy, a contraction is sure to come at some point in spite of Trumponomics. Thing is, and politics aside, the Presidential Cycle tells us it's the first two-years of any administration the Fed will do its 'dirty work', which is code for tightening in the Keynesian world we live in today. So again, in spite of all the hoopla surrounding The Donald and his aspirations (and don't get me wrong - I he has America's best interests at heart), the next few years promise to be interesting no matter, with the only question being when one should worry about gravity.
You should know the CDNX (see daily here) just turned lower again after completing a three-wave corrective affair over the past month or so, suggestive once last month's lows are taken out it will begin falling impulsively again. The timing for this could correspond to equity complex weakness January forecast once we move into the New Year and all the 'tax planned selling' in the broads is let loose. Again, if history is a good guide, that would eventually have an effect on precious metal juniors just like every other time the credit cycle first turns south in response to crashing stocks. This was discussed at length last week. The markets are going to turn the speculators into hamburger next year. And then there will be the hyperinflation in reaction to this to contend with afterwards, which will kill even more people going the other way because nobody will know what to do. People will literally starve and freeze to death in the streets.
On that cheery note, there is hope in good time I can assure you, however it will take more time to get market conditions / circumstances aligned before a sustainable rally in the sector will be in the cards. When we start reading more material like this, and despair on precious metals forums that lasts more than five minutes we will have some hope for signs the bullish gamblers have had there fill. As suggested above, it will likely take gold falling through four-figure support at $1,000 before we reach that point though. At that point, a consensus of the geniuses playing the calls will start betting down (buying puts). Then, like broad market bears, they would be squeezed out of ill-conceived positions and prices can rise again.
Again, before this can happen however, precious metals are poised to take another 'big hit' once the bounce early next year peters out, where in terms of the Gold Bugs Index (HUI), if gold is going sub-$1,000, it's going sub-100. The various structures (think head and shoulders patterns) don't support such a move, with the worst measuring down to 115 (and shallowest to 133), however if the options players are still betting bullish in a big way once we are down in this price range, one would have no choice other than to expect the worst. The fact it's through the Golden Retracement is another reason. HUI 100 held last time around because liquidity conditions were supportive. This time around will likely be different if the Fed keeps tightening. You get the $ up over 110 and things will be breaking down everywhere.
By the time it's all over - Trump is going to wish he never took the job.
And Dow 20,000 will be a distant memory.
A few words on the ratios we use now to help new subscribers decipher our approach to technical analysis. Ratios tell you direction, not exact pricing. Thusly, and for example, now that the Dow / XAU Ratio is firmly through the monthly 'swing line' (see Figure 3) to the upside, we know the direction is up, we just don't know what the exact effect this relationship's influence will have in nominal terms on the indexes. One thing is for sure however, the message we are getting this month is positive for the Dow, and negative for precious metals stocks. This is not surprising based on what we know is going on behind the scenes, however it's real, and likely to continue.
Once we see the monthly close, we will know more. At that time we will do Fibonacci (nature based) targeting exercises. And there will be surprises along the way, which is why we use a multifaceted approach to forecasting, with sentiment studies just as important as market charting. For example, the powers that be are using a rising $ / America first construct (meme) to bid stocks higher / push precious metals down now, however if you think a falling dollar($) will be bad for the stock market - you better think again. Thusly, this must be factored into to our considerations, where we must remain ever mindful central authorities will react to collapsing markets forcefully no matter who's in power.
While it's true the Fed (and especially Yellen) might wish to make Trump look bad (especially in the first two years of the Presidential Cycle because it won't make raising rates look political), because he's letting leak possibilities of an audit and talk of a gold standard, still, the Fed can't let the stock market crash either, because this would call into question their very existence as well. So, there are crosscurrents that need to be factored into forecasting considerations. And we do expect some degree of hyperinflation to develop in the $ at some point, but in reaction to collapsing conditions as the Fed attempts to discredit Trump, but must abandon such folly when it becomes obvious their jobs are on the line.
Look for this by mid-year; which fits with our hypothesis the c-wave in gold's present (higher degree) correction should be truncated in both price and time.
Happy New Year all.