First trading day and equity markets meltdown!

Welcome to a new year! One that should be chock full of profit opportunities. Unlike last year’s mostly tight trading ranges in many key markets …

Where Supercycle Trader put in a healthy 32.83% total return for the year …

2016 should be a doozy, with many trending moves and nicely swinging markets coming – all conducive to a load of diverse profit opportunities.

And indeed 2016 is already exploding, with global equity
markets swooning today, right out of the starting gate!

This morning, stocks are tanking all over the globe. China’s main stock index, down almost 7%, setting off circuit breakers. Hong Kong, down more than 3%. South Korea down 5.75%.

And that’s just Asia. The carnage is racking up in Europe as well, where Germany’s DAX is getting hit with more than a 4% kick in the pants.

What’s the cause? Why the carnage? It’s simple:

FIRST, global stock markets have been splintered, limping along in a mirage based on a few high flying stocks, for months now. True for Asia. Europe. And the United States.

So when you have markets that are not being supported by the troops, so to speak, it’s just a matter of time before those markets implode.

SECOND, the still strong U.S. dollar is making DEFLATION worse on virtually every continent. That’s because when global economies weaken and investors start to run for cover, the dollar strengthens by default.

Case in point: Even China’s yuan has been sliding against the dollar, despite Beijing attempting to halt its slide by recently shuttering foreign exchange operations at three major Chinese banks.

THIRD, the war cycles I have been warning you about! Just consider the weekend’s events of an escalating war of words between (a) Saudi Arabia/Bahrain and (b) Iran.

As you may know …

The Saudis and Bahrain just ended formal diplomatic relations with Iran (last night our time) because … their embassies were attacked yesterday, due to the Saudis beheading a leading Saudi Shia cleric.

So the fear now is a Saudi-Iran war, along with regional Shia-Sunni violence.

Right now, it’s too early to jump on anything new. Especially with markets reeling all over the world.

So today, let me simply summarize what my models are saying, and what we should be looking for …

Let’s start with …

Gold: Rallying this morning on stock market weakness, but still weak overall, with a cyclic tendency for yet another move lower over the next few days. I will be watching it closely.

Longer-term cycles however should also start turning up soon, so we need to be alert here to cover the existing bearish position and be ready to go long.

For now, hold your shares in DZZ with a good-till-cancelled protective sell stop at $6.53.

If not on board DZZ, do not buy now. Wait instead for my next recommendation.

Silver: Same posture as gold. We must be alert for a new rally. So stay tuned.

Crude oil: Oil has started to lift off, right on cue with the cycle chart I showed you in the last issue, repeated here.

Also note the bar chart I have for you today, showing the nicely up-sloping formation starting to take hold within a median line set.

Expect some jumpy action, but with the overall trend now higher to the $40 – $42 level, initially.

Using 5% of your trading funds, you should now be long the April 2016 UCO call options, strike price $12.00 (UCO160415C00012000) at $2.40. That price was hit on December 30. Hold.

Alternatively, if you are not trading options, you should be long VelocityShares 3x Long Crude Oil ETN (UWTI) per issue #296 from roughly the $4.23 level. Hold.

You will now enter a protective stop for this ETN position. See details in the trade table below.

I will key the exit for the option off of the price of crude oil itself and will not be entering a stop for the option.

Euro: I am not happy with the short-term action in the euro. The trend remains seriously bearish, but there’s been a recent momentum loss to the downside.

However, as long as the euro remains below roughly 1.09600 on a closing basis (currently 1.08930, 9:01AM EST) … there remains the potential for a swift nosedive lower in the euro and rally in the dollar.

Therefore:

A: Hold your ProShares UltraShort Euro Feb-16 $28 call options (EUO160219C00028000). Yes, these are underwater and running out of time, with just over five weeks to go. But they are worth holding. They can come roaring back into profit territory in a heartbeat.

If you do not own these options, for whatever reason, wait for my next signal.

B. Also hold the ProShares UltraShort Euro January 2017 call options with a strike price $28 (EUO170120C00028000). These have a year to go and are a longer-term play on the euro’s slide to well below 0.90 to the dollar and offer incredible profit potential.

NOTE: New members or members who do not yet own the above position, please see the trade table below.

C. If you own the alternative, ProShares UltraShort Euro (EUO), hold. I am monitoring a stop for you.

Stock market: Repeated here, the latest cycle forecast for the S&P 500.

Interestingly, on the final trading day of the year, the S&P 500 and Dow Industrials both slumped sharply, strongly suggesting the cycle forecast portrayed in this chart is the track the equity markets are now on.

We need a little bit more evidence, but when I look at what all the markets are telling me …

I am more and more convinced that stocks are headed lower into March, while commodities, conversely, largely start to bottom.

This would also be in accordance with my forecast from the October issue of Real Wealth Report for a rolling thunder of commodity bottoms coming in the first quarter of this year.

Bottom line: Hold your shares in UVXY with a good-till-cancelled protective sell stop at $22.24.

If you do not own shares in UVXY, wait for my next recommendation.

Best wishes, as always and stay tuned!

Larry