The Edelson Institute Bulletin: October 2017

Here is the latest members-only bulletin for October from The Edelson Institute!

In this expanded issue, I’ll walk you through my latest E-Wave cycle forecasts for several key markets, including gold, mining stocks, oil, the stock market and the dollar.

So let’s get started, as always, with gold.


The active December gold futures contract has now traded lower four out of the past five weeks, reaching a low as $1,273.60 an ounce yesterday. So, once again, gold has fallen below the key support zone of $1,280 to $1,300 that I previously alerted you to.

Just like the last time it breached support in early October, we could see gold bounce higher near term, perhaps back to the peak $1,308.40 from mid-October. But ultimately, expect gold to roll over again, as shown in the updated E-Wave cycle chart below.

In fact, every cycle chart for every precious metal we track — gold, silver, platinum and palladium — is in agreement. And each points to a correction that’s underway now.

The bottom and next upturn date for gold is projected to be on or about the first week in December. At that time, a sizeable rally will begin. And this should carry gold much higher into mid-2018, according to the cycle forecast.

Until then, remain patient. And by all means keep some dry powder ready for the next big buying opportunity.

The E-Wave cycle chart for silver looks nearly identical to gold in terms of the forecast downtrend that’s underway, so I won’t cover it in detail here. However, this chart is updated each week and posted on the member website.

The good news for silver is the forecast points to an earlier upturn date – in mid-November.

Mining Stocks:

Similar to both gold and silver, the E-Wave cycle forecast for mining shares (shown below) calls for a correction into early November. That turn date has pushed out a bit, telling me the cycles for the various metals and mining shares are coming into better alignment as the turn dates approach, just as I expected.

Junior miners (above) should bottom and turn higher about the same time as silver, in mid-November. I expect large-cap mining shares to lag a bit, not bottoming until later on next month, closer to the bottom in gold itself.

But be prepared to buy with both hands when the time is right, because I expect the next great buying opportunity on the other side of this current pullback.

In fact, from 2000 to 2007, gold prices gained 214% in value during the first phase of this secular bull market. And the Barron’s Gold Mining Index soared 577.3% in value, with mining stocks outperforming gold itself more than 2-to-1!

How big will the gains be this time around? The chart below tells me loud-and-clear to expect another huge move in gold and silver miners during the next phase of the gold bull market.

This chart tracks every bull market in gold mining stocks since 1942. And based on history, the median bull market gain has been nearly 500%! And the biggest bull markets of the past 50 years have produced gains of 600%-plus!

I’m tracking several dozen select mining stocks, plus ETFs that track physical gold, silver and other metals. After this correction runs its course, you can expect a new batch of recommendations from me to cash in as precious metals blast-off to the upside. Wait patiently for my signals.

Crude Oil:

Black gold appears very close to a short-term top, if it hasn’t peaked already, according to the cycle forecast. We should see oil and energy stocks correct lower into mid-November as you can see in the E-wave cycle chart below.

I expect a bounce in early December, followed by another leg to the downside for oil into early 2018. Ditto for energy sector stocks. I’m considering playing this correction with a well-timed inverse ETF recommendation, either for oil itself or energy stocks. But right now, the timing doesn’t appear quite right.

An important fundamental consideration to keep in mind is ongoing conflicts in the Middle East. These could disrupt oil supplies in the blink of an eye, spiking oil prices higher. That’s a good reason to favor the short-trade with energy sector stocks, rather than crude. But I’m waiting patiently for the green light from my technical timing indicators, so wait for my signal.

Dow Jones Industrial Average:

The cycle forecast for all three major U.S. stock indexes are now in complete agreement, calling for a decline from now, through year-end. That would be a total shock to most investors, because the “consensus” expects clear sailing for stocks during the seasonally strong period of the year, from October through May.

In my experience, the consensus often gets it dead-wrong at important turning points in markets. So a downturn for stocks makes perfect sense. The cycle forecast for the Dow, above, shows a decline from now into late December, perhaps extending into January 2018.

In last month’s bulletin, I alerted you to this same downtrend forecast for the Nasdaq-100 Index. And in this issue, I’m including a cycle forecast chart for Nasdaq futures, below.

As you can see, a nearly identical pattern calling for a sharp correction in the tech-heavy Nasdaq into year-end. The S&P 500 cycle forecast is also in complete agreement with the Dow and Nasdaq, so we have a trifecta of indicators pointing to trouble ahead for shocks.

That’s why I urge you to hold the ProShares UltraShort Dow30 ETF (DXD) and the ProShares Ultra Short S&P500 ETF (SDS), although both are underwater right now. Same goes for your newest recommendation, the ProShares UltraShort QQQ (QID), which is designed to profit handsomely from a Nasdaq decline.

U.S. dollar:

The dollar rally finally re-asserted itself last week, as the U.S. dollar gained significant ground against most global currencies, especially the euro and yen.

As you can see above, the cycle forecast expects a brief pullback for the buck in late October, but then another leg higher for the dollar into December. Geopolitical tensions are resurfacing in Europe, specifically the standoff between Spain and Catalonia, just as the cycles of war correctly foretold.

That’s good news for your ProShares UltraShort Euro ETF (EUO), which is moving higher along with the buck, as the euro declines. And I see a lot more profit potential ahead. The euro rallied nearly 17% this year at the recent peak, so there’s plenty of room for it to fall further in the weeks and months ahead. Stay tuned!

Bottom line: We are getting very close to what could very well be the buying opportunity of a lifetime in precious metals and mining stocks, with a bottom and cycle upturn coming into alignment in November.

U.S. stocks show the potential for a sharp decline, according to cycles for the Dow, Nasdaq and S&P 500. Crude oil and energy stocks are due to correct their recent rally. And the dollar should remain in rally mode into 2018, but could be choppy. Hold all open positions and stay tuned for more market updates.

And please be sure to mark your calendar for the next members-only Edelson Institute Executive Briefing and Q&A, which will be held on Wednesday, Nov. 1. No RSVP is required, but be sure to save the date. You’ll receive a special link to view this presentation by noon on the day of the event. Plus, don’t forget to send me your questions and comments right away via the Edelson Institute Editor’s Mailbag.

Good investing,

Mike Burnick
Executive Director
The Edelson Institute