The time is now right to add to our silver position. We’re also seeing a good opportunity to jump on a new commodity market that’s perking up with plenty of upside potential: coffee.
Here are the details …
First, silver is recovering strongly from its recent pullback. The market tried to retest the early July low, failed and has since turned higher. This is exactly on cue with what our E-Wave cycle was forecasting.
And that makes now a perfect time to double-up on our initial 2.5% stake in the VelocityShares 3x Long Silver ETN (USLV).
Further support for the silver market comes in the wake of last week’s softer U.S. consumer prices and retail sales data. These data points reduce the odds of the Federal Reserve hiking interest rates this year. (Those odds have dropped from as high as 60% last week, to less than 45% this morning.)
This helped the silver market register a bullish outside day reversal to the upside Friday. And it’s being accompanied by more upside follow-through this morning.
Other bullish forces for silver include:
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Chinese regulators cracking down on rampant debt and excessive speculation.
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Slowing U.S. economic growth outlook, with the Atlanta Fed’s GDPNow model forecasting Q2 growth at 2.4%.
- Record buying interest into silver ETFs.
Additionally, money managers hold their largest net-short position in two years. See chart:
As the above chart highlights, the so-called smart-money usually gets it wrong at key turning points. And sure enough, money managers have their biggest net-short silver position in two years.
They’re likely already getting nervous. That makes them increasingly vulnerable to cover those losing bets as silver moves higher. This dynamic is known as a short-squeeze … and it should deliver sharp gains in a very short period of time.
Here’s what we recommend:
Using another 2.5% of the funds you have allocated to this service, buy the VelocityShares 3x Long Silver ETN, symbol USLV, at $10.65 or better. This order is good-till-canceled.
This addition brings your total allocation in USLV to 5%.
New buying opportunity in coffee …
Second, the coffee market is likewise showing bullish price action. September coffee futures climbed to a fresh two-month high last week. But we expect the upside in coffee is just beginning, thanks to an uptick in supply concerns.
Coffee slipped to a 17-month low in June on reports of how large this year’s crop would be, at the same time that demand is flat.
But now, there’s growing concern about Brazil’s production. More and more reports of coffee-berry borer (beetle) infestation are arising. That’s a factor that reduces crop yield and, thus, output.
This comes at the same time Colombia’s June coffee output was down 9% on a year-over-year basis. That marks its third-consecutive monthly decline.
In relatively short-order, the abundant coffee supply is looking scarce.
As you can see in the E-Wave cycle forecast chart below, coffee recently bottomed right on cue. And now, it is just starting a major uptrend — one that should carry prices much higher into September!
In addition, money managers are holding record short positions. Just like silver, the smart-money is about to get caught leaning the wrong way at the wrong time in coffee.
This should provide rocket-fuel to the upside move we see unfolding according to the E-Wave cycle.
To capitalize on rising coffee prices, we recommend buying the iPath Bloomberg Coffee Subindex Total Return ETN
(JO).
Here’s what to do right away:
Using 2.5% of the funds you have allocated to this service, buy the iPath Bloomberg Coffee Subindex Total Return ETN, symbol JO, at $17.95 or better. This order is good-till-canceled.
In the meantime, we’ll monitor risk on these positions for you. Hold all other positions, and stay tuned for new trades coming your way again very soon.
Good investing,
Mike and David
