GST Issue #213
Dear Member,
It’s been a wild and wooly several trading days for most markets. Gold has tried to rally, but then succumbed and plunged again. The stock market keeps trying to break out, and fails, with the latest decline having done some considerable technical chart damage.
Meanwhile, the grain markets remain mostly weak at the knees, along with most commodities, except oil. This is due to deflation, which is still biting hard, despite the recent decline in the U.S. dollar.
Speaking of which, note how gold has fallen right along with the U.S. dollar of late. That’s not a good sign for gold, and it indeed remains caught in a bear market.
There is not much new to report on the fundamental side of things. Greece remains problematic, and although it met a recent debt payment, it’s unlikely the country will meet its next debt repayment, which totals some 300 billion euros, come the middle of June.
The deflationary pressure remains super intense in Europe, and the euro has bounced against the dollar, simply because it was so oversold. I expect another leg down in the euro soon, and a rally back up in the dollar.
In addition, and as expected, Asian markets are selling off sharply now. The decline is largely technical in nature, but is boosting the FXI May 2015 put options, which are still underwater, but could come roaring back.
These put options do not expire until next week, so stay tuned, we may have to hold these to the wire. The underlying security, FXI, is currently trading at just around the $49 level, so these put options could go into the money at any moment.
Also hold your inverse ETFs, DXD and SPXS, on the U.S. equity markets. Per the aforementioned, the equity markets here also look to be now rolling over.
As to gold, hold all your bearish positons, including DZZ and the July 2015 GLD put options with a strike price of 114.
If gold can soon break the $1,164 level (currently trading at $1,182 as I pen this issue, basis the nearby June futures contract) … then all heck should break loose and we should see the yellow metal plunge – initially to $1,080 and then, even lower.
Also hold your DBA July put options, with a strike price of 23. Grains are ready to start another leg down, which should drive these puts still higher.
It looks like we went long the bond market a bit prematurely. German government bonds have taken a big hit since last week, which has spilled over into the U.S. bond market.
Nevertheless, if U.S. equities roll over to the downside, which I expect they will, we will most likely see the bond market rally right back up. Hold your TYD position, but make sure you have your good-till-cancelled protective sell stop in place at $42.49.
Lastly, I’ve received several questions regarding oil, whether or not it has bottomed. My answer: No, oil has not bottomed. It has merely bounced from deeply oversold conditions, and it has met my bounce target of the $60 – $62 level.
Oil could move a tad higher, perhaps to $64, but like gold, the next BIG move in oil will be a plunge back to the mid-$40 level, another bounce, and then, even lower, to below $40 later this year.
I will be looking to soon add a bearish position in oil, so stay tuned!
According to my timing models, there are two months this year that stand out as being the wildest for market action: June and October.
We are rapidly approaching the month of June so be sure to be ready to trade the dickens out of these markets, and for some really awesome profit potential.
In any one year, any professional trader will tell you that most of the time they sit around waiting, taking stabs at the markets. But in most years, nearly all of the profits can come from just one or two months of torrid trading. I expect that to be the case for you, and soon.
Best wishes,
Larry
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