Nearly 39 years – that’s how long I have been trading the markets. And in those 39 years, I can’t recall a period as eerie as the one the markets are now going through.
Record tight trading ranges in many markets. Record swings from one day to the next in others. Historically low volatility in many, and historically high volatility in others.
Are my models wrong? Could it be that the open positions are all bad, all on the wrong side of the markets, all headed for losses?
No, I don’t think so. And that’s not my opinion. It’s based on facts …
First, consider gold and silver. Neither metal has given one single buy signal other than on the very short-term hourly charts. On daily, weekly, monthly and higher levels (annual) – not one single buy signal has been hit.
Even gold’s rally to the $1,306 level in early May didn’t cut it, and remains thus far as a probable very important cycle high, from which – even though it certainly doesn’t seem that way at the moment – a steep crash could unfold, at almost any time.
More proof: A recent Commitment of Traders Report (COT) shows the highest number of net long speculative positions in gold than at any other time since gold’s record high of $1,921.50 in September 2011.
This means that …
One, it has taken more buying power to move gold up from last December’s $1,040 level to the current $1,275 area – a meager $235 rally – than it took to move gold to $1,921 in September 2011.
Two, this herd of recent buyers, once spooked, will turn into a stampede of sellers, overnight.
This is an extremely dangerous and bearish setup not just for the gold market, but for all precious metals.
What will spook gold? That’s impossible to say. But what we can say is that it is likely to occur very soon, based on the timing models, which I’m republishing here based on May 5 data (nothing has changed since then) …
… other than the fact that gold is edging closer and closer to going off the cliff.
What if the model is completely wrong? We would know – I repeat the line in the sand – if gold were to close above $1,306 in the June futures, on a Friday closing basis.
Then we would likely see a minor pullback of a few dollars the following Monday, followed by a rocket ride higher to the mid-$1,400 level in gold.
We WILL indeed play that rally if those are the cards we are dealt. But thus far, there is no reason to believe, from any indicator I look at, that gold is ready for such a breakout. Ditto for all precious metals, and for mining shares, which are poised for at least a 50% decline – and probably much more – heading into late May/early June.
We’re also seeing the same trepidation, no man’s land type of trading going on in crude oil, in the grain markets, in global stock markets, and in the biggest, most actively traded markets of all, the currency and FOREX markets.
For now, rest assured I am watching all markets like a hawk. Also note that you should have been stopped out of ProShares Ultra VIX Short-Term Futures ETF, symbol UVXY, when it hit my recommended protective sell stop at $12.90 yesterday. I will be looking to have you reenter this position, or a similar bearish ETF on the stock market, soon.
Continue to hold all other positions with their related stops in place.
Stay tuned and best wishes,
Larry
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