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Sell the News, Buy the Fact | Weekend Report | 4th-5th March 2017

Sell the News, Buy the Fact | Weekend Report | 4th-5th March 2017

Merchant’s Weekend Report

23rd Issue

Happy weekend everyone. I know some of you have taken big losses while some of you have taken big profits. Whatever state your account is in, reset your mind and realise that tomorrow is a new day. So whatever mistakes or successes you have experienced, the next trade does not relate to the last one. It’s separate, it’s new and doesn’t care how much you previously made or lost.

A new trade doesn’t carry baggage: only you do. So wake up, smell the coffee and get your thinking cap on.

The Bottom Line

I’m cutting directly to the bottom line so that you don’t have to wade through charts and self indulgent paragraphs to figure out what the point of the report is. (P.S you may not like what I’m about to say…but as always, I could simply be wrong. Use it, don’t use it.)

The bottom line is:

  • I think  that any bounce in gold or miners will be an opportunity to short or exit the miners.
  • I believe that gold and miners will experience pressure as we we near the 14th March with a rising dollar.
  • I believe the Federal Reserve will raise rates, which will further pressure gold and miners (USA) after the 14th.
  • I believe you need to treat your preferred miners on a case by case basis where breaking support will lead to a lower support.
  • I think that the PPT (Plunge Protection Team) has sent a clear message about the “strength” of the U.S Stock market: it will not bend for Brexit, it will not collapse under Trump, it will not buckle under interest rate hikes and European instability such as the Dutch Election will only make the dollar and U.S Stock Market stronger- That is the message we’re being sent from the powers that be. How else is the Dow Jones at 21,000 while GDP just reported so poorly?
  • Gold and gold miners will be excellent buys at pull back prices. I don’t think there’s any reason to be too hasty.
  • REMEMBER: The massive rally we had in January 2016 was due to the stock market having the worst January in stock market history. So we all expected it to repeat this time: it didn’t. The stock market is now at a record high.
  • In my opinion, the Fed wants to raise rates because it needs to quell inflation and any bubbles that are about get out of control: in the short run, traders will trade negatively towards gold and gold miners in this regard, however, once they’ve had their fun, they’ll realise that Gold is in an accumulation phase due to the enemy of all currencies and fiat wealth: inflation.
  • Currently the economy is reporting high inflation, lower GDP etc… BUT the market shrugs it off because of this Trumpian drug which shouts “Spend, spend, spend!” Spend on infrastructure, spend on military, spend on social security etc… This of course will be powered by deficit spending: spending money that doesn’t exist but rather is created by the Federal Reserve.
  • The relationship between currencies and gold will break down in the near future, I expect. What I mean is that currently if the Yen weakens, then Gold weakens. If the Dollar strengthens then commodities and gold/silver/platinum tend to weaken. However, the relationship will soon be replaced by the link between gold and inflation. Each time inflation is reported, gold will be pushed higher and higher. So this is not tomorrow. This is in the medium term.
  • Remember, the market thinks that when the Fed raises rates, they will in fact be fighting inflation, making gold less desirable. The only issue here is that with GDP being so low, raising rates is going to slow the economy down to a halt. Therefore the Fed will need to start printing money by allowing the government to spend spend spend. When they launch QE4, we will see the dollar strengthening as well as gold strengthening too. However, it will be inflation that will be the driver of gold’s dollar value.
  • Finally, the only wild card here is the Australian Exchange rate AUDUSD: if the US  Dollar rallies further (I believe it will rally…much further due to this economic circus) then the Australian Dollar should weaken, which would be positive for our gold, silver, platinum and commodity miners.

I have run out of time to fill in the charts…. but silver and platinum have broken below support. Gold regained some footing but could be a last hoorah.

 

I will post the metals charts separately. I apologise in advance for the the report being so brief but will  expand shortly…

 

Once again, I won’t be entering metals unless the individual miner is at a bargain price and unlikely to trade lower than its support level.

 

|the Merchant

 

 

 

17 Comments

  1. TJ

    Martin Armstrong says dow 23000 before collapse while others believe this month it starts its decline to begin the bear. We must remember there is more than one country that can influence the markets, China and Europe come readily to mind!

    Reply
    • the Merchant

      True. Money will usually flow to the stronger and more promising market/sector.

      Reply
      • TJ

        fear is money will run out of markets altogether and rest into safe havens, dollar and gold….. and not miners

        Reply
        • the Merchant

          Although I think as in 2008 that would be a short term flight.

          Reply
          • TJ

            for some miners yes…but with debt based miners….?

          • the Merchant

            You’d have to be fussy with the quality of miner.

  2. Matthew Butler

    Great article Jack! Buckling up for the ride!!

    Reply
  3. Boudicca

    Hey Jack,

    Great succinct post! Another key indicator which I’ll be watching is US Nonfarm Payrolls. This comes out this Friday, March 10. A strong report will indicate that the Fed will probably have another interest rate rise before June. From what I have read, a strong Payroll report is highly likely. My two cents worth, Au may bounce this week but will resume its downtrend after the release of Nonfarm Payrolls. This may well present a perfect opportunity to get in early for Au’s next great bull run.

    Reply
    • the Merchant

      Hi Boudicca, I would usually agree with you. But the GDP growth dropped down to a dismal number, yet the Fed rate hike probability jumped to 94%. I think it’s likely that the Fed HAS to raise rates because they’re running out of bullets for the next recession. Therefore they may keep this market propped up so heavily that traders will actually start ignoring safe haven assets. When will it fall apart? We might still get the Dow ramping to a few thousand higher in this madness continues. I think it’s important to be in metals, but not to rush in …rather wait for those nightmare days and slowly phase in… I could be wrong of course. But we shouldn’t always believe that every day will be a doom’s day. Right now people are making free money by entering the Dow/Nasdaq and S&P 500… when there’s free money to be made, metals will lag with little interest in the sector. Perfect time for buying.

      Reply
      • Anonymous

        Exactly my thought.The expectation sits at 94 % ,maybe more today.Surely nobody in the Gold Universe expect anything else.IMO the rise is baked into the cake,there will be a short reaction but like you said ,a good accumulation area is right ahead of us.

        Reply
  4. Anonymous

    Hi Merchant,

    Completely agree with what you say. I think it would be suicide to enter into gold miners before the FOMC meeting.

    However, I wanted to share some rules/quotes that I came across in my readings this week in the run up to the FOMC meeting.

    [Edson Gould’s] rule states that “whenever the Federal Reserve raises either the federal funds target rate, margin requirements or reserve requirements three consecutive times without a decline, the stock market is likely to suffer a substantial, perhaps serious, setback” (Schade, 2004).

    [Marty] Zweig’s Fed policy rule is simple, “three steps and a stumble.” Basically, when the Fed raises interest rates three times, the stock market stumbles. When they lower rates, it’s good for stocks.

    If the FOMC raises in March, this will be the third consecutive raise. Obviously buying into gold miners before the FOMC meeting based on this is pure speculation and I would never recommend that but its something really interesting to keep in the back of your mind I thought.

    What’s your view?

    Reply
    • the Merchant

      Hi Someone… I count March as the second consecutive rate hike if it happens? I think those rules may or may not apply. What I can observe is that the stock market has every reason to fall apart, yet money keeps pouring in. I would say look at the individual miner…when it becomes ridiculously undervalued then it can be considered. Keep in mind that we are a few months away from the next quarter results…so no need to rush unless the market loses control and actually starts tanking.

      Reply
      • Anonymous

        I would not be surprised to see the US stock market go higher,despite the coming rise,as well as the US$.
        There is a lot of money leaving Europe .

        Reply
        • the Merchant

          In a previous post I mentioned that Dow 30,000 may be achieved must sooner than expected. Legal Ponzie scheme. Only the holders get burnt.

          Reply

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