In normal times we could expect the “summer doldrums” to set in just about now and hang around until after Labor Day. But these are no ordinary times. In fact, the mistake being made by many is to approach markets like one has in the past. Throw out most history books as what’s unfolding here in America is unlike anything ever in our history.
It would be hysterical if it wasn’t truly shameful regarding a financial ad that has been full pages in several different publications. A well-known financial services firm is urging investors to use their services because they’re “rethinking their wealth strategies”. I’m not kidding. Translation – We totally screwed up and changed millions of people lives for the worse but since we can’t say we were wrong we’re going to go with “rethinking”. Unlike when we were kids, there are no do over’s in the financial arena (unless of course you qualify for a bail-out).
To those investors who continue to entrust their finances to so-called experts whose job it was to protect their assets but instead lost them, the only advice I can give you at this time is an old saying:
“Fool me once shame on you. Fool me twice shame on me”.
U.S. Stock Market – While the “happy” crowd will surely say this is just a correction in a new bull market, the technicals strongly suggest distribution to me. I remain fully confident that we were fortunate to greatly participate in the greatest bear market rally of all-time and any substantial rally from here should at best get to DJIA 10,500, a point where I would almost certainly become an aggressive shorter again. Free falls are behind us and the real tough pains of a grinding bear market lies ahead. I expect we’re going to see several years of a wide trading range whereupon one needs to learn how to save their firepower for special situations only. The days of being fully invested are gone with buy and hold for the long term.
10yr. and 30yr. Treasuries – After nearly doubling from 2% to 4%, the 10yr. has seen some deserving profit-taking. A break below 3.50% would be a gift to go short. The world realizes America has gone way pass the line of no return. History’s biggest debt junkie has no clothes.
U.S. Dollar – The countertrend rally continues and as expected is overall weak and little more than a consolidation of the big decline we enjoyed. The 83-84 area on the U.S. Dollar Index should be the best this blip up can achieve in a long-term avalanche down to new lows in the next 12-18 months. We could stay in a fairly tight trading range for now so let poor Uncle Sam catch a breather before resuming his “Dead Man Walking”.
Oil – Starting to get some fairly significant technical sell signals based on some momentum indicators I’ve developed over the years. We could see oil back in the 50s on a close below $68 so stay tuned. This is not a signal to go short as I remain very bullish long term.
Precious Metals – While gold has been moving sideways, a significant amount of increased bearishness has become evident. Predictions of much lower prices down to $300 are becoming daily events. This is exactly what gold needs to finally have a strong enough base to get above $1,000 and stay there. My only concern for now is we’re now in the most seasonally weak period for gold (Until September). So long as we stay above $925 we’re okay. If we break below we could see $850 but regardless I fully expect to hold most if not all current positions (and would likely add if we got that low again).
Base Metals – I’ve noted of late that base metals have basically reached their upper levels and because I don’t believe we’re going to have strong economic growth any time soon, there was no reason to first start buying them. I do believe the lows are in so one should just use sustained weakness for buys until further notice.
Stocks to Consider from Model Portfolio – In recent times I’ve advocated taking profits and build a war chest of cash but keep a core holding of metals related plays. Most open positions are holds but a few speculative (gambling) plays remain on the suggestion list. They’re:
Northern Dynasty Minerals ** The technical’s have turned short-term bearish so the best approach at the moment appears to make any new purchases between 6 ½ – 7 U.S. There’s super support in the low 6’s so if gold does break down somewhat that short-term adversity could create another great buying opportunity for NDM.
Nevsun Resources – The $1.05 – $1.20 area U.S. would be a gift buying zone IMHO. Again, we would likely need a sell-off in gold to get that low but I wouldn’t look a gift horse in the mouth if that happened.
Taseko Mines ** Everything I know at this moment on the company allows me to sleep quite well. Here too any metals sell-off would create a gift opportunity to accumulate more.
Continental Minerals – The riskiest of these four but never-the-less a great asset play. I’m very biased due to my personal equity position and the fact that I’m engaged by other companies that share the same management team.
** Both NDM and Taseko were first part of the model portfolio but became clients of Grandich Publications afterwards. While I have kept them on my model list because of this, please note the inherited risks in our disclosure.
In the last week or so, I spoke of oil being toppy and suggested high risk speculators/gamblers should consider some bearish call spreads on oil and oil stocks. I still think that’s a fair gamble.
