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Trading Notes

The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Wednesday, September 7, 2016.


 

So it appears my concerns about the larger equity complex here in the Fall may be unfounded - no matter rapidly deteriorating fundamentals, technicals, or political backdrop. Yup - apparently Hillary could drop dead tomorrow and it wouldn't amount to a 'hill of beans'; the European Union fail; the euro disintegrate. Why? Answer: SDR's. Apparently the 'New World Order' (NWO) has planned for all this long ago, and the switch into International Monetary Fund (IMF) SDR's is supposed to create so much liquidity there's no problem that's too big to handle. The double money printing technique is just what the doctor ordered in this time of need.

Yup - the USDollar($) is no longer the world's reserve currency, and the Chinese yuan is emerging as a regional reserve currency in its own right; but hey, what could possibly go wrong as long as these characters can still print money for themselves. (i.e. because printing money for the people would unleash inflation globally and be a problem.) Frankly I have my doubts as to how this all turns out, but we won't have to wait long to find out because it goes live October 1. That's when China becomes an official IMF 'global player' and regional / global hegemony superpower.

The last time the NWO did something like this was the introduction of the euro, and we know what happened after that. They inflated the crap out of everything going into the year 2000, and this looks like we could have a repeat here going into whenever. (i.e. next year, a year ending in '7'?) Of course years later, it's failing miserably, with eurozone economies imploding from within, and this latest 'monetary experiment' will undoubtedly turn out the same. This time however, it won't be deflation we need worry about, but hyperinflation. That's the message we are getting in precious metals these days, with silver in the lead again.

Yes, we have silver back at $20 again, further carving out the 'inverse head and shoulders pattern' its working on, preparing to vault higher once again sometime next year by the look of things. (i.e. it might take that long to get rid of idiot hedge fund managers long Comex silver.) So, don't be fooled by this strength in the metals post Friday's Jobs Report (along with all the other bullish news). While silver, and the rest of the precious metals complex, might have further gains to digest going into options expiry next week, with the white metal possibly vexing $21 again, it's important not to get your expectations too high right now.

Because again, more weakness is likely in store as silver continues to carve out the right shoulder on the aforementioned pattern, likely taking it down into the $18 area one more time, at a minimum. Thing is, it's not just silver signaling this probability in isolation either, but the most important predictive ratios in the sector as well, with the Dow / XAU Ratio chief among them. As you can see on the attached daily chart, it's counting higher in 5's, and carving out its own inverse head and shoulders pattern, where yesterday's strength should come close to capping the impulse if this is true.

Again, if this is the case, while prices could grind slightly higher in coming days, the next move of consequence should be back down again for the precious metals sector as it continues to digest the gains witnessed in the first half of the year. And while nothing is conclusive regarding this hypothesis as of yet, again, with the above mentioned (and very important) technical conditions to digest, at a minimum, one should at least be somewhat cautious moving forward, where with any luck we see the Dow / XAU Ratio work its way higher towards the correction target of 250 in coming weeks as precious metal shares, and the sector, become aligned / recharged for another lasting impulse higher.

That said, the 200 HUI target is still in play believe it or not, so again, be vigilant. The put / call ratios are all falling as prices are squeezed higher with the exception of NUGT, which is being used for hedging speculation. So while precious metal shares could chop around in this vicinity until options expiry next Friday, after that, gravity could take over. They are not going to hand the best opportunities to the impatient. It would take two consecutive closes over the large round number at 250 HUI to call this possibility into serious question, so we should know something more concrete by week's end.

The big risk right now is with Hillary's health deteriorating so fast, one morning you wake up and all of a sudden she's a 'no show'. Again, as I have been saying for some time, if that happens, all the 'status quo trade' will want out at the same time, which could create enough volatility to drag precious metal shares down with the broads. Don't forget about the positive correlation between the two. This will matter at some point, likely causing hedge funds to cough up their positions, just like Hillary can't stop her coughing now.

Make no mistake, Hillary is really sick and might not make it to election time. Thing is, the powers that be will not be able to replace her in time. Once this is realized, the status quo trade is going to want out all at the same time.

Anybody buying stocks in front of this, even precious metal shares given what we know about liquidity related correlations (see Figure 3), is taking an uneducated and dangerous risk.

Those are the facts.

 

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