SCT Issue #241
Many seem to think that gold is about to take off to the upside. They say there are too many shorts in the market. Or that inflation might be making a comeback. Or that China actually somehow bought more gold than it said it did, therefore, gold will explode higher.
All of that is nonsense. Period. Yes, gold can stage a rally here. It made a premature cycle low on July 23, and has failed to exceed that low going into the ideal timing target that I told you about, which was August 4th.
But a massive gold rally? Hardly. Here’s why …
A. Yes, there are a lot of short positions in the precious metals right now, but that does not guarantee a powerful rally. Short positions can be alleviated by sideways rallies, or weak rallies. You don’t need a big rally to relieve a big short position, or even an oversold condition.
B. The charts support sideways to only slightly higher for gold. Strong overhead resistance lies just above current prices at the $1,118 and $1,122 levels.
C. The dollar remains strong. Conversely, the euro is very weak. Among the commodity influenced currencies, such as the Aussie and Canadian dollars, they too remain weak against the dollar. Not the kind of action you would expect if a strong precious metals rally was forthcoming.
D. Most other commodities also remain weak. Oil well below $50, poised for new lows. Grain markets weak. Sugar weak. And more.
E. Short-term cycles, yes, call for a rally, but a weak one at best. The more important, longer-term cycles still point to a potential MAJOR low and collapse heading into mid-November.
In addition, my system models tell me to stay short as long as gold remains below the $1,118 level on a closing basis.
Ergo, I recommend holding all bearish gold positions, with protective stops in place. New subscribers: Wait for my next signals in gold before taking any action.
Should gold pick up strength, I will advise exactly what to do.
Natural gas, as expected, is firm. That’s good news for the United States Natural Gas ETF (UNG). Hold with a protective sell stop good till cancelled at $11.64. New subscribers, wait for my next signal.
Now, to the U.S. stock markets. I would love to tell you they are headed to new record highs and that the long awaited blast off to Dow 31,000 is now starting.
But that is not the case. The recent snap back rally is part of a major topping process that will ultimately lead to a sharp, sudden pullback – before the Dow heads any higher.
Therefore, you will also continue to hold the bearish stock positions, with protective stops in place on a good-till-cancelled basis.
Moreover, you will effectively add to your bearish posture on the stock market via a new recommendation. Specifically, I recommend purchasing an ETF that will rise in value as volatility starts to pick up in the stock market.
The ETF I recommend is ProShares Ultra VIX Short-Term Futures ETF, symbol UVXY. Note that you are not trading futures when you buy this ETF. It is an ETF that mimics the volatility of the S&P 500 VIX Short-Term Futures Index. This particular ETF is a double-leveraged ETF.
If, for instance, volatility in the S&P 500 or Dow increases by 10%, this ETF should increase in value by roughly twice that amount.
Here are the details for the recommended trade:
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For all subscribers, for every $25,000 you are trading: BUY 100 shares of ProShares Ultra VIX Short-Term Futures ETF, symbol UVXY, at the market. Place a good-till-cancelled protective sell stop at $20.35. |
Stay tuned and best wishes,
Larry
