Last week, you should have been filled buying a 5% stake in Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG). Excellent!
The bullish upturn in mining shares came right on cue with our E-Wave cycle model forecasting a cycle low last week. We likewise have fundamental confirmation in the recent soft patch of U.S. economic data, which is reigning in expectations for more Fed interest rate hikes this year.
Add it all up and we should see higher prices ahead for the miners. It will not be a straight-up rally, mind you; expect plenty of twists and turns. But our cycles point consistently higher for the metals well into July.
The softer economic readings also put a bid under Treasury markets and weighed on the dollar, as well as our position in ProShares UltraShortEuro (EUO).
An added drag comes from the firestorm out of Washington, after Trump’s sudden firing of FBI Director James Comey, as well as last night’s report that the president revealed classified information to a Russian diplomat last week. Expect more political intrigue to roil markets, just as the cycles have been forecasting.
But we think the slump in the dollar is temporary and the buck should soon reverse in the very near future. In the meantime, continue to work a protective sell stop on EUO at $24.14.
The flip side of dollar weakness is renewed interest in gold miners, and that provided a notable lift for your VanEck Vectors Junior Gold Miners ETF (GDXJ) along with JNUG, not to mention your shares of Seabridge Gold (SA) and Sibanye Gold (SBGL). Continue to hold.
More fundamental confirmation for gold’s rise comes from import data out of India that showed April gold imports jumped three-fold from year-ago levels to $3.85 billion.
As for stocks: Despite geopolitical headwinds, cybersecurity threats and softer U.S. economic data, U.S. equities continue to defy gravity — and our expectations for a correction — as forecast by our E-Wave model. But in reality, much of the recent gains in the S&P 500 are attributed to gains in oil and oil-related stocks. This comes in response to jawboning by Russia and Saudi Arabia over extending production cuts into March 2018. Go here for more details on the oil market outlook.
And despite record highs in the Nasdaq and S&P 500, the Dow Jones Industrial Average and financial-sector stocks failed to follow suit. This bearish divergence bodes well for our ProShares UltraShort Dow 30 (DXD) and Direxion Daily Financial Bear 3x Shares (FAZ).
Additionally, our E-Wave cycle charts clearly indicate lower stock prices from here from this month, through early August, as you can see below:
As shown, the Dow has likely peaked already and is now on track for a decisive move lower in the coming months.
Continue to hold our core positions in ProShares UltraShort Dow 30 (DXD) and Direxion Daily Financial Bear 3x Shares (FAZ).
Finally, our position in Teucrium Wheat Fund (WEAT) is under modest pressure. This comes from the latest forecasts calling for drier conditions across winter wheat growing areas in the coming days – before another bout of rain.
But remember, last week’s USDA report called for a 25% year-over-year drop in U.S. winter wheat production and U.S. ending supplies that are on track for their first decline in four years.
And there’s still elevated disease pressures and the potential for even greater yield losses directly ahead. Continue to hold WEAT for more upside.
And stay tuned for new trades coming your way very soon.
Good investing,
Mike and David
