Right now, there’s simply too much noise and static in the markets to make any important moves in the portfolio.
Gold is largely drifting sideways, at the top of its recent short-term trading range, but with few signs of real strength – despite the fact that gold did manage to rally and close above the $1,073.90 level last week.
December 15 – next Tuesday – is a cycle target high for gold, but a minor one, and at this time, based on gold’s behavior, it is certainly not worth going long, or even getting out of DZZ.
Moreover, it is quite possible we could get a cycle inversion – meaning that December 15 could prove to be a low instead of a high.
Interestingly, the December 15 date is also the date of the December 15/16 Fed meeting, when the Fed is now widely expected to raise its short-term interest rate.
This is telling me we should expect some wild volatility next week. I wouldn’t be surprised to see gold collapse on news of a rate hike, but then turn around and rally violently.
Or even the opposite: Rally into a rate hike, but then collapse. It is just too soon to say and too short-term a forecast to make.
Meanwhile, there is no evidence whatsoever that gold has formed a major bottom. The same overall analysis applies to silver and the other precious metals as well.
I recommend holding DZZ with a good-till-cancelled protective sell stop at $6.53. Not to worry. I am watching the precious metals like a hawk.
The currency markets are largely in the same situation. The euro is trading sideways, but at the top of its recent range. Yet, at the same time, cyclically another leg down in the euro, and move up in the dollar, is in the cards.
Hold all euro related positions including either EUO and/or ProShares UltraShort Euro February 2016 calls, strike price $28.00 (EUO160219C00028000) and ProShares UltraShort Euro January 2017 calls, strike price $28.00 (EUO170120C00028000).
Let’s talk about oil now. Wow, what a whopping plunge to below $40 yesterday!
How did I know over two years ago that oil would plunge to below $40? It’s simple: It’s in the cards, in the cycles, in the swings from one extreme to another. That’s how all markets work and oil’s plunge yesterday to near $36.50 is a testament to the power of using cycles for forecasting.
Right now, I am expecting one more leg lower in oil, then a bottom and a sharp rally.
Hold all bearish crude oil positions which include SCO or the United States Oil Fund January 2016 put options, strike price $14.00 (USO160115P00014000).
Lastly, let’s talk stocks. The U.S. stock market – I repeat – is headed for a disaster. I’ve talked about the weakening internals of the stock market in recent issues. But now I want to show you one chart that is absolutely startling.
This is a chart of the Dow Jones Industrials versus the Dow Jones Transports, the Industrials on the top.
Notice how the transports are peeling away to the downside. The Transports are comprised of the major companies that ship goods throughout the U.S. and internationally.
The divergence since the middle of November is simply astounding. I consider it deadly for the stock market.
Therefore, hold your shares in UVXY with a good-till-cancelled protective sell stop at $22.24.
Stay tuned!
Larry
