2018 will be a pivotal year for several markets. New trends will emerge, and several markets are expected to turn on a dime. Geopolitical turmoil will rise along with volatility. It’s crucially important that you’re on the right side of these shifting trends.
In this issue, and again next week, I’ll provide detailed cycle forecasts for precious metals, stocks, bonds and crude oil. These are the markets that have key inflection points dead-ahead. And, in my view, they offer the very best profit potential for 2018. So, let’s get started with stocks.
The cycle forecasts have been consistent in calling for a stock market correction. They have been consistently wrong as no meaningful correction has materialized. In fact, you should have been stopped out of your ProShares Ultra Short QQQ (QID) position last week. And your QQQ puts will expire this week with no value.
What we are no doubt experiencing here is a cycle inversion. By their very nature, inversions are obviously difficult to detect until after the fact. In the chart above, you can see the Dow should have turned down in October. Instead, it has been nearly a straight-up rally for stocks since then.
The next upturn date is forecast on or about late January 2018. Two things are possible.
First, the current stock market rally could accelerate into a parabolic move higher. That’s certainly a good possibility considering the strength of the rally so far.
Second, I strongly suspect however, that rather than a rally, the stock market may in fact peak near that date and decline into the next turn date, which is early March.
Only time will tell, but for now it makes sense to stay on the sidelines and watch closely how the markets behave into the late January turn date.
Precious metals …
Gold turned higher early this year, up 12% through mid-June. Then a sharp drop in July gave way to a renewed rally that peaked at $1,367 an ounce in September. Gold, silver and platinum have been in a downtrend ever since, weakening into year-end.
The good news is this price action is following the cycle forecast very closely, and I believe it’s setting us up for the buying opportunity of a lifetime in 2008.
From a technical and sentiment viewpoint, this year’s price action is music to my ears.
Gold had a classic 50% retracement of the big move up from last December’s low at $1,076, to this year’s peak at $1,367; precisely what I expected.
And from a sentiment perspective, many investors have given up on gold. As more and more cash got sucked into an overpriced stock market this year, gold and silver simply lost their luster for many investors.
In fact, many believe the peak above $1,900 in 2011 was the end of the bull market and that gold – still nearly 20% below that peak – remains locked in a bear market. But nothing could be further from the truth.
Gold bottomed in December 2016 and a new, stealth bull market is underway. Stealth, because so many investors don’t recognize it yet, as is almost always the case early in a new uptrend.
As you can clearly see in the cycle chart above, the forecast calls for a continued pullback for gold into year-end. An important turn date in late December should follow … and then an explosive rally early in the new year.
Please bear in mind, it won’t be a straight up move for gold, or any other precious metal. In fact, you can see a correction is forecast in March-April, designed to shake you out of your positions. Don’t let that happen, because the trend is shifting to the upside.
The next key level to watch for gold is $1,300 an ounce. A close above this level on a monthly basis will signal that a new intermediate uptrend has begun.
The next level to watch: $1,355-$1,367, the September 2017 highs. Above this level tells me the primary uptrend in gold has been restored.
Next stop should be $1,400 and then $1,800 an ounce, before gold finally takes out the 2011 highs.
The overall pattern for silver, and the cycle chart, look very similar to gold. Same goes for platinum and palladium.
An added fundamental factor in favor of silver is its use as an industrial metal, in addition to its precious metal properties.
As economic growth accelerates, industrial metals like silver and copper will be in higher demand. Also, inflation worries will start to surface next year. And that should drive precious metals higher.
That’s why silver should benefit from a one-two punch of upside demand in 2018!
Key levels to watch for silver are, first, $18 an ounce, and then this year’s high at $18.65. Above these levels tells me silver is back in a solid uptrend.
Next, watch the 2016 high of $20.38. A monthly close above this level signals the primary uptrend for silver is back in place.
Silver should then take aim at the $30-$35 an ounce level, before once again challenging the 2011 high of $49.80!
Saving the best for last, let’s look at the miners …
As you can see above, the cycle forecast for miners also calls for a slide into year-end, followed by an explosive rally in 2018. Again, it won’t be straight up all year. There will be plenty of twists and turns along the way, which will be magnified for the miners.
You should be holding four positions now: First Majestic Silver (AG) and Wheaton Precious Metals (WPM), both silver plays which are up slightly. And you should hold Seabridge Gold (SA) and Sibanye-Stillwater (SBGL), which are both down.
SA is a prime low-cost producer with upside potential to at least $35 a share – a triple from today’s depressed price. SBGL is depressed for a different reason.
First, platinum has performed even worse that gold this year. Second, acquisitions of Stillwater Mining earlier this year, and now Lonmin, have diluted shareholder equity. But the company is now positioned as the world’s second-largest platinum producer. And when platinum prices turn higher in 2018, SBGL will be a rocket ride to the upside.
In fact, the profit potential in select mining stocks is truly enormous going forward. And 2018 will be the year to start capitalizing on this move in a big way.
In the next issue, I’ll cover the 2018 cycle forecasts for bonds, crude oil and energy stocks. Stay tuned.
Good investing,
Mike
