The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, November 28, 2016.
Donald Trump did it. He is the newly elected President of the United States of America - the USA. The USA - that place of apple pie and opportunity - the land of the free and brave - embodied in Donald Trump and his success. Since its inception, America has been the place where your dreams can come true, fomenting a melting pot of hungry opportunists looking to exploit both new frontiers, and the wealth this would bring. And while new frontiers to exploit in America have come and gone long ago, replaced in earnest post World War II with Globalism, the exploitation of the public is still quite fashionable these days, a corporatist conspiracy that is systematically wiping out the fortunes and dreams of the middle class, where its neo-fascist perpetrators (globalists) are attempting to capture complete control of our futures.
It's called the New World Order (NWO), where members get together regularly at Davos and Bilderberg meetings (plus emergency meetings), plan strategy, and then set their minions loose on the world to carry out 'the plan'. The primary contrivance they have adopted to accomplish this goal is the Cloward - Piven Strategy, where they go in and collapse countries, take them over, make their populations mindless slaves, and then convince the public 'centralization is success' - and a one world government, which they control, is the answer to all problems. So in the end, it's the greedy corporate elites and fascists that end up running the world. China is the model globalists are using. This is where they want all of us - underpaid slaves pumping out more stuff so they stay rich. The globalists, who signed up the Chinese elite long ago, want America, and the rest of the world, to be obedient slaves to their greed or die.
Because the elitists don't care if you die or not, as long as they have more stuff - they are really deep people. This is the model - nothing fancy - just an Orwellian nightmare taken to the extreme. So let's hope I'm right and in spite of all their twisted efforts people around the world begin to take control of their own destinies once again. That's what is happening you should know. Decentralization and neo-nationalism trends are breaking out all over the world (Italy is next), and will be emboldened by the Trump victory. So if we are lucky, and these movements remain focused, globalists will fail in their plans to rule the world. It may all be for naught, because they are definitely winning, however we must try - no? Leftists and the embedded bureaucracy (deep state, shadow government, etc.) are attempting to demonize this regime change because they might need to find real jobs as a result of this new reality (as opposed to raping the public), however for now we will assume they are fighting a losing battle - the will of the people.
Some think the globalists will crash the stock market and economy on Trump's watch so they can blame it on conservatives and take back control. As you would know in reading my recent thoughts on the post election prognosis for the stock market, I too think next year, a year ending in '7', could very well witness a significant top in stocks, only for a different reason. Not a conspiracy theory reason, but simply because of the excesses, meaning it would have happened no matter. Because it was destined to happen no matter who was elected President as quite simply - it's time. It's an election year, and in usual fashion the incumbents pump up the volume to enhance their re-election chances, and this year was no exception. So when you add the 'Trump pump' into the formula, where he's already busy following through on is election promises, the economy can continue to 'look good' for some time (next year?) - an extended honeymoon if you will.
So it's important to understand the excesses are already here, as deficit spending is not new. And Mr. Trump has made many promises in this regard, where before he's even in office, he's blowing up the bond market(s) as a result. Because he's got a big job ahead of him if he's going to make America great again - he's got miles to go before he will sleep - to borrow from Frost. And again, the most troubling element of his plan is the deficit spending that will be required to pay for all the non-regenerative capital expenditures on infrastructure and military spending, while at the same time attempting to cut taxes. (i.e. to benefit who?) At some point the rising rates needed to stave off inflationary pressures will do the job, risking the entire debt colossus in the process. Interestingly, Steve Bannon, Trump's newly appointed chief strategist, doesn't think this is a problem. He thinks the biggest global bond market crash in over 25-years is 'no problem'. (Maybe he's spent too much time in Jamaica?)
Be that as it may, I can assure he will begin to understand his own naivety on this subject when the Fed raises administered rates again in December - just in time for Christmas. This is when some cold water will be thrown on the Trump administration's plans, which should translate into some stock market volatility. In the meantime, as Christmas approaches, apparently American's have not been this hopeful in a decade. And you can't blame them, because reality is a bitch. This is of course why central authorities must keep the bubbles inflated, which is why money supply growth is accelerating, and is likely to continue doing so as Trump begins to spend money in keeping his promises next year. So again, as discussed previously, while stocks could be riled if the Fed raises rates in December, don't go thinking this is the big top. Stocks have never topped in December, and are not likely to start now.
Again, with next year ending in '7', if history is a good guide, it's more likely money supply keeps pushing higher at least initially (because the bond market should be a problem at some point), providing a window between February (the top in financials in '07) and August (the broad market top in '87) for a possible profound reversal in stocks. This is the window we are looking at based on historical precedent, its occurrence based on a decennially (10-year) based psychological patterns that grips the population, where post election stress is released for the speculators / hedgers, causing them to lower their guard. And you can see how this can happen if Trump comes into power with both guns blazing, spending money like a drunken sailor - what could possibly go wrong for equity bulls right? There's simply too much pressure in the pipe to worry about losing money. That's when this normally cautious group (and the rest of us), might get caught.
This is of course what happened in both the year 2000, and 2008. The speculators / hedgers finally capitulated and key index open interest put / call ratio collapsed, and so did stocks in lock step. In case you didn't know, in the absence of something like huge money flows coming into a market because of something like a Donald Trump being elected (surprise change), it's the speculator / hedger betting practices that the machines feed off, which in turn controls the markets. What's more, this is true from the broad measures of stocks right through to precious metals. Money supply only needs to be stable if speculators are bearish and betting down for stocks to go higher. This is the story behind the perpetual short squeeze in stocks that began with the machines back in the 90's. As you can see below with the risk adjusted S&P 500 (SPX) vexing sinusoidal resistance fan again, although higher rails may be hit this time, we are now in a topping process - and its important to realize the situation. (See Figure 1)
So if money supply is going up, and gold (precious metals) is supposed to be a hedge against currency debasement, then why (oh why) is it getting shellacked right now? Answer: One word - confidence. Who the hell needs gold if stocks are going up - especially if you live off 'the system' - and the proliferation of unsubstantiated money - which is America's primary business. That's what Wall Street is all about - papering over the world with fraud - and anybody who doesn't go along with it (the unipolar world colonial model) gets a visit from the CIA, or an air craft carrier group, or both. And the globalists ride on top of this edifice, given radical change is afoot these days the Trump Presidency will discover soon enough beyond the scope of the anti-establishment movement that propelled him into power. In the meantime however, it's full steam and again with his nationalist agenda that looks good right now (and is certainly better than other 'conventional' alternatives), which is why the Dow is soaring. (See Figure 2)
Technical Note: A rising Dow / XAU Ratio is broad market bullish (Dow is the numerator) and precious metals bearish (XAU is the denominator), which you can see being played out now, where a rising ratio is reflective of rising stocks and falling golds. So we've got what looks to be 5 of 5 of the first big wave higher in the Dow / XAU Ratio set to complete soon, meaning a correction lower is due any time now (after month end?), so it better get busy if it's to be finished by the Fed Meeting. Or perhaps the rising $ trend is already factored into prices for now. (i.e. this now looks probable, meaning a Fed tightening is already discounted into prices. In the very short-term (pre-month-end), it doesn't matter because the defining ratio(s) for the sector are the precious metal share to commodity (gold and silver) ratios (and the indexes [HUI, XAU, etc.]) at present, which are still going sideways in a correction, ready to head lower again.
After month end, stocks should pull back some as hedge fund related (fiscal) year-end window dressing (buying) dries up, however just like the pattern in 1999, although the extremes are substantial, this will occur again at the end of December too. Then, if the pattern is maintained, just like in 1999, stocks should drop big in the first week of 2017, mope around until mid-February, and then moon-shot into March. This thinking is supported in the pattern of the Dow / XAU Ratio, which can be seen here on the daily, which is in the process of completing a five-wave advance and likely to consolidate for a month or two. Although you can't make this out on the monthly plot above, where in fact one could argue the trend should reverse back down as a 'swing line' test is underway. Thing is, look at the MACD to gain perspective. It still needs to come off the bottom before it will in a position to turn lower again. What's more, as it's just crossing over now, it could be argued an acceleration is just ahead, which would likely result in crashing precious metals. (See Figure 3)
Personally I don't think that will happen, however one thing is for sure, precious metals remain a 'high risk' moving forward (after a soon to arrive correction back up) because a great deal of money still needs to but into the Trump phenomenon, and this risk won't likely be lessened until sometime later next year. As opposed to the S&P 500 (SPX) pictured above, which has nowhere to go but up apparently (because of Trumponomics), precious metals are going down, possibly (likely? - HUI to 100) way down, with gold tagged for a breach at the large round number of $1,000 as the dollar($) pushes towards 120 - because America is great again. American's owe a lot of money around the world and continue to push the unfortunates around in colonial conquest - but hey - they are great in case you didn't know.
The monthly SPX chart above is being featured this week because amazingly, I didn't have to change the annotations from years ago at all, where we now are back looking for a channel test at approximately 2350, now closer to 2400. Will it get that high? Is such a reality still 'not likely'? Well, if like in the first quarter of 2000, the NASDAQ goes berserk again, 'easily' is the answer to this question. Thing is, Trump is not exactly 'tech friendly', so look for financials (because of buybacks), cement (think wall building) and construction, etc. to lead this time around. That said, The Donald's got his work cut out for himself if he's going to keep all the promises made during his campaign, and rising interest rates could end up being 'the turd in the punchbowl' far sooner than most may desire.
But again, we are definitely elated that Trump is going into the White House and not Hillary, because the alternative would have been far worse than any legitimate failures The Donald may produce - that's for sure - think World War III. Just to give you an idea of how crazy she (still) is, she (the Dems, left, status quo, neoliberals, and neocons - a great many leftists) are now challenging the election results, but what do expect - they are either psychopaths or at least of a sociopath nature - so they must keep busy. That's what happens when you officially go 'loopy' no matter the circumstances, etc., the crazies keep getting crazier until they are shut down, locked-up, etc., which is not yet for these people unfortunately. Once Trump is sworn in hopefully this will change, because America has enough problems, however I wouldn't hold your breath in this regard.
So again, it's increasingly looking like the administered rate(s) hike we are expecting when the Fed meets mid-month is already largely discounted into the $, precious metals, and possibly even stocks, however even if a substantial bounce in precious metals were to occur post December 14, the thing to realize is the charts are telling us it won't last, where present trends are likely to continue into next year. Along this line of thinking, it should be understood that with the crosscurrents in the markets these days, attempting to play the bounce in precious metals could be (is) quite daunting. For example, because the juniors are so heavily correlated with the broads (liquidity), they could actually decline when stocks are correcting, this while the more liquid shares and metals are correcting higher. Thing is, with today's strength, the precious metals sector has already been correcting sideways (higher) for over a week and a half, meaning if the Fed pulls the trigger in two weeks gold, silver, and the shares could get walloped again.
The situation is fraught with danger because of competition and wrong-headedness amongst the speculators, as usual.
See you next time.