The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, March 14, 2016.
Looks like The Donald's balloon is gaining escape velocity, where a win in Florida this week would pretty much cement the deal (his candidacy). The surprise last week was Bernie Sanders in Michigan however, which is not good news for status quo plunderers et al. Because according to him he's going after these people if he's elected. That's how he's going to pay for all the free stuff he plans to give away the education, health care, and free balloons. It's just magical what Bernie is planning because his target audience is disenfranchised Millenials. Of course in terms of what actually happens if he's elected, if Obama is a boldfaced liar, what does that make Sanders who won't do half of what he's promising as well. At least Trump is keeping his promises within the realm of a somewhat more 'conservative world' whatever that means.
That's why stocks remain under pressure; because the educated money that sees Sanders winning realize he would be worse for Wall Street, corruption, etc. than Trump and they are both bad. So they are selling, which is why stocks will remain volatile this year. Because this has now progressed into a real 'game changer' for the status quo, meaning it won't matter who gets in Trump or Sanders a shake up is coming up and down the line. The status quo is under attack, and is potentially mortally wounded. Viva la revolution. I will write more on this subject matter in the coming months because it's important to understand the importance of what is happening here. This is America's (and the world's) last shot at avoiding World War III. The status quo in America must be neutralized if war and financial collapse is to be avoided.
This is not new material for me. Long-time readers will remember this piece from February of 2011, well before such thinking would be perceived pertinent, or popular. 'Authoritarian government' really means greedy bastard neocons want to drop more bombs on people for the sake of Wall Street's war machine stocks (look what they did in Somalia last weekend), however the lives they are destroying will have a cost to all American's one day because they will go too far with the likes of Russia who is capable of fighting back. Then you will have these same idiots raping the American public with all this manufactured war having to resort to nuclear weapons to hide their weakness when push comes to shove and then you won't be able to eat the food grown in the US anymore to go along with the increasingly undrinkable water.
In the meantime however, as far as the Millenials (and other 'radicals) are concerned, it's all about the economy it's all about their disenfranchisement from the increasingly financialized economy by the old sick fogies in the status quo. But it's not just the Millenials. Angry white males have joined the revolution as well. And it doesn't stop there, because if the true state of the economy is any indication, the disenfranchisement process is accelerating. Sure the boys have jammed stocks back up off last month's lows in almost unprecedented fashion, but once the shorts are fully squeezed and buybacks dry up, both manufactured sources of buying, the next trip down for stocks should be quite scary potentially (actually) reflecting the true state of the economy. Any close below last month's lows in stocks should trigger some sort of panic if this chart is any indication.
And as soon as we see the c-wave advance in the Dow / Gold Ratio (DGR) we are expecting to mark such a turning point, this can happen. Friday likely marked the beginning this move, with the target for a top in this last corrective wave higher expected to be either later this week, or next, post options expiry. This would mark the end to the larger correction higher off last month's lows predicted at the time on the basis of the wave count. The previous affair into last month's lows lasted approximately 3.5 months, so one third of that time puts us into this time frame, again starting as early as next week, to as long as the beginning of next month if bearish peculators decide to keep open interest put / call ratios elevated post options expiry on the 18th next week. There's lots of bad news out there these days, so an extended affair would not be surprising.
As we approach the election however, and as has been the case in 2 of the 3 other election years this millennium (2000 & 2008), the urge for speculators to continue speculating / hedging in broad market puts should wane (because they think the Fed won't let the market go down), which would allow stocks to fall (crash?) again into this timeframe. Crude oil, which has a seasonal tendency to remain firm into May could help to extend the recovery cycle even further in the extreme, with the idea being the more it recovers the less stress will remain on the banks (think oil industry bad loans) and corporate bond spreads. This is of course why we now have the positive correlation between crude oil and the broads, because the fortunes of the entire system now depend on whether or not crude recovers enough to bail out the credit markets or not. (See Figure 1)
If the Fibonacci signature in the Gold / CRB Ratio traces out to the ultimate target however, although further marginal gains (in oil) into April / May are possible, it appears the most likely prognosis for both crude and stocks is still down, where even when this ratio turns back down the message is still bad for the broads. (i.e. because input costs will be rising once the CRB turns higher.) The upshot of all this in terms of precious metals is positive on all accounts, where gold is a winner whether stocks are under stress or the system is re-inflating in the initial stages of a post crash environment. In fact, goes appeal goes even further in the context of a possible (likely?) reset that would be necessary if stocks do melt down, which would take the entire monetary system with it. A look at the monthly XAU / Gold Ratio pictured below is suggestive a bottom in the sector is in (time-line and Fibonacci resonance turns), so something big is on the way. (See Figure 2)
Because as stated in the figure above, this is just the beginning of the recovery in precious metals, so what ever you do, don't let go of any positions you have already accumulated. What's more, don't be like the knuckleheads attempting to speculate on a correction lower, which is why the open interest put / call ratio in DUST keeps falling, and why these donkey's keep losing money because of the perpetual short squeeze they are sponsoring. This situation is serious now, because when these idiots finally decide to stop buying DUST calls a big correction could be the result. Of course we are expecting a 38.2% Fibonacci retracement anyway, so maybe this is what must happen now so that we can clear the decks in terms of setting up the psychology for another lasting advance. That's the theory anyway. (See Figure 3)
I say this because in looking at Figure 3 above, while the turn higher has also occurred on a significant time-line interval, in taking a look at the stochastics, we can see that they are all approaching the upper reaches of their technical ranges even the longer duration measures. This is of coarse not what we want to see with the ratio still plumbing long-term lows essentially, again raising the specter that if options speculators in DUST were to lose their penchant for hedging a bone jarring correction could grip the sector. Why would this occur? Well, how about Trump looking like a shoe-in to the White House after the primaries (or Hillary is indicted) this week and these knuckleheads decide hedges are no longer necessary because an audit of the Fed is coming.
Or perhaps the now record-breaking COT situation for both gold and silver will matter more this week with the Fed likely to talk tough afforded by a strong stock market. Again, all we need is for the DUST call buyers to take their collective foot off the gas pedal just a little bit, and all of a sudden the COT situation will matter a great deal. Don't let those DUST call buyers see this report pointing out a new major long-term buy signal has now been triggered in gold. This might be enough to cause them to cease their idiotic ways. Obviously nobody knows what will get these idiots to stop hedging, however once they do, precious metals will be whacked. This is the pullback we are waiting for to back up the truck.
Turning away from precious metals for a moment, the big question for many is now that the S&P 500 (SPX) has arrived at the 200-day moving average and 'rounding top' resistance, should those so inclined be looking at shorting (or selling longs) again? Answer: A lot of traders are selling here, as evidenced in rising open interest put / call ratios (see here), so I would have to advise no. This situation should change soon enough however, once the SPX rises above the 200-day MA, so keep an eye on broad market ratios for an exhaustion signal. We will of course provide our post options expiry (OPEX) analysis next week, where things may appear different. So stay tuned.
What's more, we still have the Fed related games this week, where their prop desks will be sure to be pushing stocks higher and precious metals lower, which would allow the a b c correction in the DGR to complete. So a move up to the 2050 area on the SPX this week might in fact be the ticket, however one does not want to get overzealous in this regard until we know how broad market options players are betting post options expiry with short interest across the landscape still so high. (i.e. along with this, this, and this.) What's more, if the negative correlation between the stocks and precious metals is to generally be maintained, and precious metals need a correction, again, one is well advised to be cautious in this regard.
That said, things could change quickly moving forward, so stay spry. Again, check your ratios daily (see here), especially starting next week.
So the big question of the hour is, 'are Americans going to keep voting themselves into destitution; or, are they going to reject the oppression of the oligarchs, bureaucrats, and status quo in November?' And while it's true the twisted trickery employed by the shape shifters will likely continue, as we get closer to election time it will become increasingly evident to all 'change is a comin', and you better get with the program, because it's reality. This week could cement things in terms of the Republican candidacy for Trump so its no surprise gold is throwing off a long-term buy signal given the implications.
Because where are all the 'crooks in charge' going to hide their wealth if we are going to cashless societies and they lose control of the double standards they are managing so well right now. Again, this is why so many are piling into gold, and why this trend should accelerate going into election time as growing numbers realize it's going to happen. So while we fully expect a fairly significant correction in precious metals anytime now, don't be confused by the COT or put / call ratio analysis please dips are buying opportunities with the bigger the dip the better the opportunity.
It's a natural to get a 'benevolent dictator' after a bout of neo-fascism. This is the way its come down in history. The only question now is 'is that what The Donald is benevolent or is he just another liar?' The Millenials don't necessarily like Trump because he's going to put them to work, while Bernie was going to give them the money. (i.e. because he's a socialist.) That's why you saw the disruptions at Trump rallies over the weekend so from that perspective Trump is good for America not that this will make much of a difference with all the damage that's already been done.
Still one must try so Viva La Donald.