A lot of news flow lately, none of which is good. I will cover most of this over the weekend as I highlight four seismic events that are converging at once. Currently markets are gyrating a bit however the overall trend remains down in spite of the Fed and Treasury providing massive stimulus. Capital has a way of moving in a way such that it will force the hands of weakness and inefficiencies. For example after Chairman Powell downplayed the use of negative interest rates the other day, the market immediately started placing bets to the contrary. In other words, the credibility of his statement is weak and the “market” doesn’t believe him.
As it stands, the thesis of short equites and long gold is playing out well. Below is a daily chart of the Dow showing Fibonacci retracement levels.
You can see that the Dow retraced about 60% of the March crash at the peak of the retracement, and has oscillated around the 50% retracement level for about 6 weeks. If you recall, I closed short positions that I had accumulated from December to February on March 16th which turned out to be a few days prior to the ultimate intermediate low on March 23rd.. During the 2nd week of April I began accumulating new short contracts as we approached the 50% retracement line. The expectation of a 50% retracement or thereabouts came from review of the fractal from the initial wave down. To watch a wave scale-up from its fractal underling is an amazing and beautiful thing to watch. It’s like having a mini time machine that can see into the future. Currently, assuming we have started the next wave down which I contend we have, I expect this initial impulse to bring us down to approximately Dow 21K ish and SnP 2600ish. It is possible we have one more push higher before collapsing to those levels however I accept that risk. After the initial plunge I expect some kind of rebound which may be violent, followed by an even nastier plunge that may last years.
Gold has finally broken out of a multi week oscillating triangle as I show below.
If you can discern the notes on my chart, I expect gold to rise to 1940 at minimum, likely in the next couple months. It could go much, much higher. The gold thesis is simple. Gold has been used as an anchor to financial transactions and to financial systems for millennia, until the past 50 years. With governments increasingly becoming unstable due to massive debt and political chaos, central banks continue to do the only thing they know how to do, that is print money out of thin air and finance deficits. That of course is extremely bullish for gold. There is also a risk of complete system failure and reset, and an expectation that the new system may be tied to gold again. Maybe, maybe not. Either way, it is very wise to own gold right now, both physical gold and synthetic derivatives for speculation. It is protection against monetary insanity.