In the days since Brexit last week, I have been looking at every one of my 12 different models, from the macro, global picture, down to the specific markets we trade – metals, currencies, stocks and bonds.
Naturally, I was looking to find changes, given the Brexit vote. Admittedly, I wanted the U.K. to leave the European Union (EU), but in writings and emails with some of you I mentioned that I felt the “powers-that-be” in England would somehow rig the election to keep Britain in the EU.
It was not a guess on my part. It came from sources I find to be very reliable in Britain. Harken back to last year when the Scots wanted to secede from England, but the vote failed. It was a rigged vote and I knew ahead of time it was going to fail.
But none of the above matters right now and I am certainly not looking to lay blame on any of my sources. I believed the Brexit vote was going to fail because of the way the markets were setting up, especially gold and silver, headed according to my work into a June 27 low.
Had that happened, it most assuredly would have been due to a failed Brexit vote.
But it didn’t. Instead, we got a rare and powerful cycle inversion in the metals and gold and silver rocketed higher. But …
Does Brexit Change Anything?
The answer: A resounding NO. Let me be perfectly clear:
First, though I expected the Brexit vote to happen on a second referendum at a later date, the vote to leave the EU should be no surprise at all to you. Way back in 1999 as co-editor of Safe Money Report I started warning everyone that the European Union would never work. As a culturally trained anthropologist with a specialty in cultural economics I simply knew that there was no way the forced union of so many different cultures and languages would work.
It was patently insane. Unlike the United States and many other parts of the world, Europe is a land of 87 distinctly different ethnic groups speaking more than 60 different languages. How could you possibly create a “United Sates of Europe” out of that?
Second, I also warned back in 1999 that the single euro currency would be an equal failure over time. Besides the above problems, a currency is a national flag if you will for a country’s sovereignty. And even if you can get a country to give up its currency …
The founders of the euro were brain dead. They made more mistakes than you can count on your hands in not putting in place the proper financial underpinnings needed to support a single currency. Like a real central bank (the European Central Bank is merely a figure head bank while all the other countries still have their own central banks and the right to print euros!)
Or a federal bond market. Or a real constitution.
The U.K leaving the EU is merely the beginning. In the months ahead you will see France leave … Spain … Italy … Portugal … Greece … the entire European Union will disintegrate, probably by the end of 2020, which is the peak in the war cycles that I have previously written about.
Yes, it will bring enormous volatility to the markets, a good thing for you to capitalize on.
No, it will not be the end of the world and take down the U.S or Asia as well.
As I have told you many times before, the demise of Europe will be positive for Asia and even more so for the United States, driving trillions of capital into the safe haven of our country’s currency and stock market, taking the Dow Industrials to at least 31,000 by 2020 and gold to well over $5,000 and silver to over $125.
So you should have no fear. Although the Supercycle Trader track record is certainly underwater year-to-date, you’re following one of the very few analysts in the world who foresaw all this and more, and over the weeks, months and years ahead I’m going to help you protect and grow your wealth like never before and beyond your wildest imagination.
Now Let’s Look at What Market Changes Have Occurred.
First, gold: I’ll be perfectly clear …
First, nothing has changed in gold or silver’s long-term bull markets. They are still in the very early stages and both metals will achieve better than $5,000 and $125 by 2020.
And for all the reasons I’ve previously cited. Sovereign debt crises, EU breakdown and euro currency collapse, war cycles which are ramping up with even greater speed now, and more, much more.
But short-term we are now faced with two scenarios for the precious metals. Per the AI neural net chart below, you can clearly see the June 27 cycle inversion. But going forward, the forecast line drops precipitously into October, before rallying again into the new year.
This is telling us to be aware of two scenarios:
A: Either the cycle inversion on June 27 was a one-time inversion, which often happens, and gold will now start to first drift lower but then fall hard into October. Or …
B: The cycle inversion will extend into October and gold (and other precious metals) will continue to rise, sharply.
At this time the weight of the evidence lies squarely on scenario A. All the precious metals are extremely overbought and in the case of gold, there have never been more open long futures contracts in the history of the Comex. Those two facts are extremely bearish for the metals.
Now, you’re probably asking something right now like, “What, Larry’s still bearish, with all that’s going on? I’m never going to make any money in this service.”
I’ll answer by saying that I am long-term bullish but very disinclined to go long leveraged precious metals positions at this time due to how overbought and crowded the long side is.
However, if I see signs the inversion will continue into October, I will not hesitate to make hay from it for you.
There is also a scenario C, where the metals pull back slightly over time to alleviate their overbought conditions and shake loose weak longs, and then continue along scenario B, a cycle extension of the inversion that takes gold and silver much higher into October.
Bottom line: The cycle inversion has clouded the short-term a bit, but now we have a gold market that is going to move. As soon as I see which way to play it, you will get the appropriate recommendation(s).
Now, let’s look at oil: Overall, oil has done exactly what I expected, a largely sideways trading range for the last two months. Brexit has no fundamental reason to be impacting oil, so we don’t have to worry about cycle inversions, etc. We do, of course, need to keep our eye on terrorism and its impact on oil.
Here is my latest AI neural net chart for crude oil:
According to the model, oil should fall into August, then rally into October and then decline into February next year where a double-bottom may form down at the $26 level, from which a new bull market will emerge.
I think the most important aspect of oil right now is how large and sweeping the swings are. That’s great for trading!
Bottom line: Expect to get very active in oil again, and very soon!
Now, to the Dow Industrials: It is simply amazing to me how the Dow has followed the model to the tee all year long, swinging back and forth between the mid-18,000 on the upside and the low 17,000 on the downside. A roughly 1,300-point range all year long.
If we could be the shortest-term traders with me sending multiple issues per day, often within minutes of each other, trading the Dow would yield some spectacular results.
But day-trading, or even overnight trading, is not what this service is about.
What we are looking for in the Dow Industrials is its inevitable blast-off to over 31,000 over the next few years.
But that is not in the cards just yet. Between now and October the Dow is going to trade back and forth in a tighter range than it has done for the last year and a half.
But it will also be a good thing: It will be a strong sign that the Dow is compressing like a spring, and ready to blast off into a new leg higher, smashing major overhead resistance which still stands at 18,500 – and then rocketing higher to 31,000+ by 2020/21.
For now, I will look for short-term opportunities in the Dow, but don’t expect much.
Last, the U.S dollar.
No surprises here. The dollar rallied strongly after the Brexit vote, and it remains in a longer-term uptrend.
For now, we should see the dollar move higher into the middle of August, then enter a trading range for the balance of the year. I may recommend you take a long position in the dollar at any minute, so stay alert.
Bond markets remain at highs, with record low yields, and more countries will start lining up to leave the EU. But don’t expect them to drop like flies. This is an unfolding process that will take months and years.
By 2020, the EU will be gone, as will the euro. And a new monetary system will be needed for the entire world.
Stay tuned and best wishes,
Larry
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