-- Published: Wednesday, 14 January 2015 | Print | Disqus
Over the past several days I have analyzed dozens of high flying stocks with nosebleed multiples. They all have put in massive tops. It will not take much digging to find them, as they are ubiquitous. Here is an example of one. That is a 3 plus year chart and it has disaster written all over it. This means the rally is stocks is over.
Then there is the bond market, which as I type is looking an an ALL TIME low yield potential close in the 30 year. Now how many times have the great prognosticators all told us about capital shifts out of bonds and into stocks? Is that what we saw these past few years as gold and silver were pummeled? No, we saw stocks rally on multiple expansion and a seemingly relentless rally on the long end. So, all that money in the system via the central banks saw it funneled everywhere but precious metals.
If the economy was doing great things the long end of the curve would not look like this: However, it does and the general market bulls never had an explanation.
Where does this leave us now? Unfortunately for the Fed, they missed their window to raise last year. They cannot and will not raise rates now. In fact, the FED has never once raised rates with a long end rallying like this, never. When you couple that with the view of the general markets having put in a significant top of some kind, it is clear the FED is in trouble.
What is at stake now is central banks across the globe have proven they don’t understand economics. They can create bubbles like no one else but they have run out of enough buyers to propel equities ever higher. The front running of their bond purchases has pushed sovereigns into negative yields on the short end and plunging yields on the long end.
In short, the entire financial system is in a very fragile state and the FED is out of bullets and they risk destroying whatever credibility they have if they do an about face. It will show the world that try as they might central planning fails.
Where does this leave gold? Gold is going to make a very large move the first three months of 2015. The weekly Bollinger Bands are extremely tight and pinched. What the outcome will be is anyone’s guess as we have three of the big central banks all meeting in the second half of January. They will either pretend all is well and look to jawbone or they will do an about face and state the obvious. Either way we are in trouble.
As for the miners what can one really say other than they are a toy for some large entity to play with endlessly. This week I watched gold rally and break resistance while GDX has fallen 8%. You would think with the SPX falling hard and the dollar/yen falling through support that GDX would have plenty of support. You would be wrong. It is impossible to say when or if this sector will catch a break, even as costs are declining rapidly (ed. Wasn’t it out of control costs that experts said has caused the abysmal performance?) Five year comparison shows GDX down 54% and gold up 10%. If only the miners were given as much slack as every other sector with their “one time charges” or non-recurring legal fees. Who knows, they might end up rallying some year.
And lastly we have the $/yen. The chart is bearish. If the backtest completes and it falls away, then a short to medium term top in the dollar is at hand.
It's a Mystery
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-- Published: Wednesday, 14 January 2015 | E-Mail | Print | Source: GoldSeek.com