Gold struggled again today and silver looked especially weak along with oil and other commodities in general. I am not sure if I have convinced you yet that deflation is hanging over our heads, but it is obvious to me. I do believe it is obvious to the Fed too, but since their credibility is on the line, and we know CNBC talking heads have been asking for a rise in rates for a year now with this so called great economy we have, I think their backs are against the wall and they must deliver a quarter point rise. To NOT do so would give investors the jitters that all is not well. To play devil’s advocate with myself, if they don’t raise rates it signifies that they do admit their 2% inflation target isn’t close to being met, that the economy is not looking good and more needs to be done to help it. Do you really believe they will admit this? I don’t.
Looking at where we are with the dollar from a longer timeframe might give us more insight. The following is the weekly chart. These are the prices we are looking to see broken at present. Technically, once 98 is broken, 100 will be broken too. If we dipped below 94, you want to have an allocation to gold and silver already obtained, but not be all in just yet. I lean overall towards the dollar moving higher than 98, but short term, depending on the Fed, could still fall to the 94 level. We are at 95.30 as I type.
What we are waiting on is direction from the Fed at this point. Is there anything the Fed will do that is bullish for gold right now? If they raise rates it should be negative and has been perceived as negative for the dollar as it is supposed to be a sign of a strong economy. Some of this will be priced into where gold is right now but let the dollar be your guide. How will the dollar take the news from the Fed? I really do think it is poised to move higher with a Fed rate increase, even though my data tells me the Fed should be doing QE rather than raising rates. If the Fed does raise rates, again I will say they are simply trying to save some credibility and give us the “illusion” that all is well in America with our economy. I don’t see it that way, but I will trade what the majority sees as the truth (even though it is fiction) and not think I am right and the market is wrong. Eventually the truth will come and it will be a tidal wave of truth, not a wave you simply surf and go back out to surf again. Eventually the Fed will lose handle as they always do. History gives us many example of this; 1913, 1971, 2006-2009 and here we are 7 years later and the Fed with a worse balance sheet and limited ability to manipulate rates. This will NOT end well. But it doesn’t mean that the Fed can’t pull the wool over investor’s eyes a bit longer. They still are king of the world mind you.
If you’ve read this far I’ll give you a bonus of what I wrote in my ETF Research Analysis tonight on JNUG and UVXY.
I said yesterday that I will probably sell half my JNUG shares to lock in profit in what will be a very volatile week with the Fed meeting. I sold half and thought we might get a run higher, but instead it reversed and I sold the remaining shares before it closed just up from that price. I’m not ashamed of taking profit. I can always get back in on a higher high tomorrow, but there is something about locking in profit with winning trades that makes me want to keep doing it more. If I can lock in more and more profitable trades I will gladly take profit when handed to me rather than get greedy and have the trade turn against me and give back some or all of profit. If you do get greedy, do it with half the shares after locking in profit until you figure out the system to get more from a trade. If the ETF is not green on the weekly, then I would simply take the profit and wait for the green buy signal, assuming it’s not a Fed week where anything can happen.
I also said yesterday; UVXY on a higher high for scalps I will play all week long before Fed meeting. Today UVXY opend at 60.47 and immediately went to 62.26, fell to 61.27 and went on to reach 63.22 in morning trading. You could have scalped any of that for profit. Notice my recommendation was “scalp” though? Since that high it fell to 60.50, rose to 63.60, and fell to 61.01, rose to 62.60 and fell to close at 60.80 and is 59.84 after hours. Can anyone trade that volatility? I would have scalped the open and been done with it. And that is exactly what I will look forward to at tomorrow’s open. I want a higher high to get a few points from it. Hope for a lower opening and then jump on that higher high for a point or two. Even if it is a higher opening, wait for a pullback and then a break of the days high for a buy. It can all happen quickly in the morning.
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.