In today’s issue, I have a new trade for you to act on right away. But first, let’s recap recent trading activity and provide an update on the U.S. dollar.
First, you should be filled on our recommendation yesterday to buy United States Oil Fund, LP (USO) around $9.12.
Fantastic! We think the time’s right for a starter position in the oil market, positioning for more upside into late August just as our E-Wave cycle model forecasts.
U.S. dollar gets slammed …
Comments from European Central Bank Chief Mario Draghi lifted the Euro currency and weighed on the Dollar yesterday.
Draghi said that he’s looking through short-term factors that are clouding the inflation outlook – like the sharp decline in oil prices. His comments were viewed as laying the foundation for slowly removing the ECB’s ultra-loose monetary policy later this year.
While Draghi maintained a somewhat optimistic outlook for the Eurozone economy, he still argued for prudence in adjusting monetary policy.
Sounds like classic central bank double-speak to me … talking out of both sides of his mouth!
Still, there’s no denying the outsized market reaction, or perhaps OVER-reaction. The euro surged nearly 1.5% yesterday, a huge move for currency markets, and the dollar slumped about 1%.
Fed talking heads …
Also later in the day, the market listened in on a few of the Fed’s talking heads, including the boss herself.
First up, Philadelphia Fed President Harker trimmed his inflation outlook, and labeled recent economic headwinds as transitory. But he also indicated that strength in the U.S. economy warranted removal of easy monetary policy, including another rate hike, and warranted starting the potentially perilous process of unwinding the Fed’s balance sheet later this year.
Second, and as expected, Yellen stuck to the June FOMC meeting script almost verbatim, indicating that the U.S. economy was strong enough to handle more interest-rate hikes this year.
It’s too soon to say if yesterday’s move means an interruption in the dollar’s emerging uptrend, or is simply a knee-jerk over-reaction by markets, made more volatile by end-of-quarter window-dressing this week.
We’ll wait and see how the dust settles before making any moves with on our PowerShares DB US Dollar Index Bullish Fund (UUP) call options. For now, continue to hold
New trade – Buy VelocityShares 3x Long Silver ETN.
The silver market is showing bullish price action from Monday’s spike low, with an advance above short-term resistance and positive momentum as it recovers from oversold levels.
While that’s constructive by itself, additional conviction for higher silver prices near term comes from our E-Wave cycle forecast flashing a bullish turn date buy signal this week. See chart below:
The above chart shows silver prices bottoming this week, that’s followed by a strong rally into early August.
We think it’s possible that this week’s spike low – into a new low for the June downdraft – and a subsequent drive higher is marking a tradable bottom and a new rally just ahead. And now’s the time to profit from it!
Here’s what to do right away:
Using 2.5% of the funds you have allocated to this service, buy VelocityShares 3x Long Silver ETN, symbol USLV, at $12.25 or better. This order is good-till-canceled.
Meanwhile, we’ll manage the stop on this position for you.
Hold all other positions and stay tuned for new trades and market updates coming your way again very soon.
Good investing,
Mike and David
