No surprise that Emmanuel Macron won the French presidential election yesterday, and by a wider-than-expected margin. He enjoyed a large and growing lead over the opposition candidate, Le Pen, in the run-up to the vote, so the outcome was largely as expected.
Also no surprise that the euro sold-off on the news as the dollar strengthened, just as our E-Wave models correctly forecast. It was a classic sell-the-news reaction.
Even though Macron bills himself as a centrist, willing to keep France in the EU, he’s got his work cut out for him in a very fractured nation. In his victory speech Macron declared: “I will fight with all my strength against the divisions that are undermining us…”
Well, he’s going to need every ounce of strength he can muster to prove that his one-year old political party is capable of winning a majority in French legislative elections just weeks away. Good luck with that …
By adding to your ProShares UltraShort Euro ETF (EUO) last week, you’re already well positioned to profit as the euro retraces all its gains over the past few months, while the dollar embarks on a fresh uptrend, as you can see clearly in the E-Wave cycle forecast chart below …
Right now, we’re eyeing additional trades to take advantage of the coming dollar move. Stay tuned for another update and potentially a new trade alert on the buck in the days ahead.
Meanwhile, stocks are drifting a tad lower today. There isn’t much in the way of market moving news or data releases expected this week. However, our E-Wave model is steadfastly signaling that a top for stocks is imminent.
It’s too soon to say how severe the magnitude of the coming selloff will be, but in terms of time, our cycles show the correction extending through the end of July. Like many corrections, this one is likely to begin slowly, almost imperceptivity, before gaining downside momentum, so now is the time to get prepared for it.
Currently you should be holding the ProShares Ultra Short Dow 30 ETF (DXD), and last week you added the Direxion Daily Financial Bear 3X ETF (FAZ), which tracks one of the most vulnerable market sectors. Plus, we expect to add more positions to take advantage of the coming correction. Stay tuned.
As for gold, it closed last week at $1.226.90, a new low on a weekly closing basis, the lowest level in seven weeks. That turns the short-term trend bearish for gold, warning a further decline is possible. The good news is that gold, silver and especially mining stocks are oversold already, so we expect a near-term bounce.
But I fear that ultimately gold may roll over yet again to test its next support zone from $1,185 – $1,200 an ounce.
Regarding our two starter positions in Seabridge Gold (SA) and Sibanye Gold (SBGL), the fundamental strength behind these stocks hasn’t diminished one iota. Both are high-quality companies with unique upside catalysts:
* SA is a fast-growing gold and silver streaming company, following the business plan of giants like Royal Gold (RGLD) and Silver Wheaton (SLW), with enormous upside potential ahead.
* SBGL just closed on two major deals that positions the company as one of the world’s premier platinum producers, in addition to being South Africa’s largest gold producer already.
Longer term, my price target for SA is $40-$50 a share, a four-to-five-fold increase from here. And SBGL could easily be a $25-$30 stock in the next few years … again, up roughly four-fold.
That’s why you shouldn’t be too concerned if these stocks slip a few dollars lower near term. Trust me, you do NOT want to miss out on the much bigger profit potential for these outstanding stocks that lies ahead.
As for your iShares Silver (SLV) and VanEck Vectors Junior Gold Miners (GDXJ) positions, as we wrote last week: We will be watching the coming bounce to determine our next move. For mining stocks, the worst of the selling is likely behind us, according to our models, while precious metals prices may still have further to go on the downside.
Remember, at key inflection points, the miners often turn first so we will be closely watching the price action ahead. Keep watch for more updates on key markets and new trade alerts when the time is right.
Good investing,
Mike and David
