The US Dollar: Only A Pause “For Now”

January 10, 2017 – If you missed my last post on “Watching The US Dollar,” you can read it HERE 

The US dollar has only paused for now, but whether or not it moves lower or resumes the rally (which began with Trump’s election,) might be decided tomorrow.

Trump is scheduled to hold his first post-election news conference tomorrow, January 11. That, and how currency traders react, will set the near-term direction of the US dollar.

The US dollar might continue sideways. Or, it might breakout upward or downward. We will know by Thursday afternoon how Trump’s comments are interpreted by the global markets.

This analysis on what gold MIGHT do next provides more insight and possible scenarios. You can read it HERE .

If you have short term positions in gold, silver, and/or the associated mining companies, it might be wise to place stop orders… in case the US dollar breaks out to the upside. If it breaks out to the downside, your stops should become irrelevant as the present gold rally continues higher.

How “Socialist” Are We?

The so-called “Mainstream News Media” has lost all credibility among most Americans and is now considered by many (if not most) to be “The Fake Stream Media.”

This didn’t happen overnight. It began long before the 2016 election campaign.

Today’s Fake Stream Media once enjoy the trust and confidence of most Americans. Gradually, however, it was infiltrated by those with a socialist bias. This includes many claiming to be “conservative.”

It’s important to understand that the words “liberal” and “conservative” are not nouns. These are adjectives. So, one has to ask; “Conservative or liberal what?” The answer is Socialist.

A minor amount of research will reveal to anyone that today’s socialism was popularized by the economic theories of Karl Marx. He theorized that the existing capitalism of his time could be evolved into socialism… and eventually into a one-world, global Communist government. Few today understand how rooted we are in these theories.

Both China and Russia began almost immediately to apply Marx’s theories… liberally.

Here in the United States, Marx’s theories were applied… relatively conservatively.

While the so-called “conservatives” here in the US are often described as capitalists… the truth is that they have merely been advocating applying socialism… conservatively.

Basically, the “liberal” politicians and economists want to drive toward socialism at 100 mph and the “conservative” politicians and economists want to drive toward socialism… at only 50 mph.

Since the days of President Franklin D. Roosevelt, it has been the News Media that has controlled the narrative… and obscured the fact… that both the Democrats and Republicans have been driving us farther and farther down the road to a socialistic government and economy.

Both China and Russia have been to the end of this dead-end road and are now transitioning back toward Capitalism. ( You can read more about that HERE. )

The total media bias in favor of Hillary and against Trump in the 2016 election campaign vividly illustrates this… as well as the backlash from US citizens who have suffered from our government’s socialistic policies.

Trump didn’t win because everyone likes his hair. Hillary lost because she represented more of the same. Trump won because the people want CHANGE.

Though there are many “conservatives” in the media, they are vastly outnumbered by the “liberals.” Plainly evident, however, even the conservatives in the media were anti-Trump.

Both the liberals and the conservatives within the media want to continue driving toward socialism. The US citizens, however, voted to put the brakes on and perform a U-turn.

Karl Marx produced his theories in 1847. He provided numerous steps describing how governments can transition from capitalism to socialism. Only 3 of the steps are listed below. Judge for yourself how far the US has traveled down the Socialist road. The 4th item is a quote.

1) “Limitation of private property through progressive taxation, heavy inheritance taxes, abolition of inheritance through collateral lines (brothers, nephews, etc.) forced loans, etc.”

2) “Centralization of money and credit in the hands of the state through a national bank with state capital, and the suppression of all private banks and bankers.”

3) “Education of all children, from the moment they can leave their mother’s care, in national establishments at national cost. Education and production together.”

4) Though it does not appear in his written works, Marx is cited as having stated on numerous occasions that; “Democracy is the road to Socialism.” (Constitutionally, the United States is a Republic… not a Democracy.)

Earl Browder, a former General Secretary of the National Committee of “The Communist Party USA,” stated in 1966; “America is getting socialism on the installment plan through the programs of the welfare state. There is more socialism in the United States today than there is in the Soviet Union. Americans may not be willing to vote for a program under the name of socialism, but put it under another party label – whether Republican or Democrat – and they are by and large in favor of the idea.”

Whether conservative or liberal, most members of the so-called “Mainstream News Media” have been biased in favor of those politicians seeking to pursue socialist policies. This is plainly evident to most US citizens. That’s why they are now known as The Fake Stream Media… just a propaganda arm of the socialist elite… driving us down the dead-end road to socialism.

Watching The US Dollar

(Click on the chart to enlarge)

One of the best short term indicators for future gold and silver prices (and all other commodities,) is the value of the US dollar.

The US Dollar Index (ticker symbols USDX and/or DXY) measures the value of the US dollar relative to a “basket” of foreign currencies. The basket of currencies are the Euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc.

I won’t go into the details of how it is computed. You can Google it and find all the details you care to read about the “geometrically weighted mean.”

Here, I’m simply pointing out that the value of the US dollar determines the price of most commodities. By paying attention to the direction of the US dollar’s value, you improve your “educated guessing” about the future direction of gold and silver prices.

Basically, when the US dollar rises in value, the price of most commodities fall.

Conversely, when the US dollar falls, the price of most commodities will rise.

Like all other assets of value, the US dollar rises and falls in the short term as it trends higher or lower over the long term. The chart above (1967-2015) illustrates this.

Long term, it appears that the US dollar will continue to trend higher as the US economy begins to grow again and US interest rates (established by the Federal Reserve) begin to rise again.

Presently, however, the US dollar has rocketed higher since the November presidential election and it (like stocks) is due for a short term pause, pullback, or correction.

This possibility that the US dollar will pause, pullback, or correct, is another indicator (along with a possible pause, pullback, or correction in the stock market) that the gold and silver prices will have a short term rally to the upside.

At some point in the future, I believe that we will see commodities, stocks, and interest rates go higher together. For now, however, there is an inverse relationship between commodities (gold & silver prices) and the US dollar & stocks.

The duration of the pause, pullback, or correction in stocks and the US dollar will determine the duration of this short term rally in gold and silver mining companies.

It could be very brief. Then again, it could go on for many months… or most of the year.

Keep an eye on the US dollar index and you will have great insight into the direction of gold and silver prices. Whatever the duration, a time will come when this short term rally in gold and silver tops out… and it will be time to take your profits.

IN THEORY, the “time to bail out” of gold and silver (and the associated mining companies) should coincide with the bottoming of this short term pause, pullback, or correction in stocks and the US dollar.

Gold, Silver, And “Educated Guessing”

(Click on the chart to enlarge)

COMMENT: I like your posts. But you are vague about what will happen. Can you be more specific about what gold and silver will do next?

RESPONSE: No. It is not possible to KNOW what the market will do next…

My suggestion that it MIGHT be time to go shopping for bargains among the gold and silver mining companies is merely an “educated guess” that the bottom is near. It might have already happened in December 2016. Then again, we might see a short term rally, followed by another leg down in this now 5-year-old bear market in gold and silver.

I can, however, be more specific about my guess!

All stocks, funds, and commodities like gold and silver go through price cycles. Gold and silver have been trending downward for 5 years. However, all along the way lower, there have been short term upward rallies. Professional commodities traders often “play” both sides of these trends and rallies. They might short gold during the declining price action; then take their profits and go long again when a short term rally seems likely. However, it’s ALWAYS an educated guess as to what the market will do next.

My educated guess that the bottom is near results from two indicators.

1) A pause, pullback, or correction in stocks is now likely. The stock market has seen a dramatic rise in a short period of time. That alone suggests that it is time for the market to take a breather – due to profit taking and wary buyers. And, the fact that the Democrats and their partners in the media have begun attacking the Trump agenda, it is likely that the Trump euphoria will soon subside, uncertainty will increase, and confidence in government will subside. Such a pause, pullback, or correction in stocks will be good for gold and silver prices.

2) The holdings of the gold-specific Exchange Traded Funds (ETFs) are a measurable indicator that shows “sentiment towards gold.” As you can see in the chart above, the actual gold bullion holdings of these ETFs has fallen dramatically as the stock market has gained dramatically. If there is, in fact, a pause, pullback, or correction in stocks… this should reverse!

At some point in the future we will know when gold and silver actually bottomed. Presently, however, we can only guess if this will be another short term bear market rally or the beginning of a new bull market in gold and silver.

Do your Due Diligence (research!) After deciding on stocks to buy among the gold and silver mining companies, be prepared to bail out if this turns out to be another bear market rally. Last year’s bear market rally lasted approximately 7 months before topping out and turning down.

Time For A Bottom In Gold And Silver Mining Companies

Uncertainty and confidence (or lack thereof) in government are the two main drivers for gold and silver bullion prices. The trend in bullion prices is the main driver for the associated gold and silver mining companies.

Leading up to the November 2016 presidential election, the uncertainty of the outcome as well as the lack of confidence in the future direction of the United States… supported gold and silver prices.

When Trump won, the uncertainty vanished and the future direction of the country became a little more predictable… providing greater confidence in government.

As a result, gold and silver prices – as well as the associated mining companies – fell hard.

Soon, the euphoria from Trump’s victory will subside. As the Democrats and their partners in the media go on the attack – in an attempt to disrupt Trump’s agenda – uncertainty will return and the present over-confidence will diminish.

These two drivers will at least arrest the present slide in gold and silver bullion prices… and possibly give us another significant rally to the upside.

Whether or not this leads to a new bull market for gold and silver mining companies is uncertain and it is too soon to say: “The bottom is in!” However, we are near the bottom if we haven’t already seen it.

As the Trump euphoria subsides, we should see a bottom in the present price cycle in gold and silver mining companies. This should coincide with a top in the stock market.

Keep in mind, however, that I’m only looking at the short term here.

Long term, I am bullish on both US stocks AND the gold and silver mining companies.

I think we may see significant ups and downs in both US stocks as well as the gold and silver mining companies in 2017. Presently, I intend to take SOME profits from both of these sectors when they spike higher. When they drop, I intend to take advantage of the buying opportunities.

Be mindful of the fact that I engage in such “market timing” with only 25% of my total portfolio value. I shelter 75% of the total portfolio value in the stocks of high-quality, dividend-paying companies. These are far less volatile and the “buy-and-hold” strategy is best for long term gains.

Yes, I sometimes take profits from these as well. But those are minor adjustments compared to trying to guess the bottom (and/or top) in the gold and silver mining companies. This is far more risky and the higher risk is why I limit such active trading to only 25% of the total portfolio value.

If you have an appetite for higher risk – in search of above-average-gains – it might be wise to gather some cash and start shopping for bargains among the gold and silver mining companies.

Time For A Stock Market Pullback

Trump Euphoria MIGHT last all the way through the inauguration on January 20, 2017. It’s possible that the “Trump Rally” will just keep right on going.

I’m inclined to believe, however, that the top of this “Trump Rally” will occur no later than mid February 2017. Then again, we MIGHT see the top this week.

Whether this is only a pause… or significant pullback… or the beginning of a serious correction remains to be seen.

Breaking through the psychological “Dow 20,000” barrier will influence many to say: “This is good enough for me; I’m taking my profits!” The number of stock traders who arrive at that conclusion (and become sellers) will determine the depth and duration of the pause, pullback, or correction.

When the buyers outnumber the sellers, prices rise.

When the sellers outnumber the buyers, prices fall.

NOTE: This is expressed in volume of shares. Only a handful of major traders (the big guys) can, and often do, “outnumber” tens of thousands of retail investors (the little guys)… because of the volume of shares that they trade.

If the major traders decide to take their profits, they will be selling to retail investors (the relatively little guys like us) who might be thinking: “Okay! The Dow is over 20,000! I better get in before it goes higher!”

This is a typical pattern. The major traders understand this pattern and often “ride the rallies” and sell near the top… usually to the retail investors. Then they wait for the correction to bottom and go shopping for bargains.

Please don’t misunderstand this. The “buy-and-hold” trading strategy still works! I too, have high-quality stocks with strong dividend yields that I will be holding for years to come.

I’m merely suggesting that sometime between NOW and shortly after the inauguration, the odds are high that the major traders will be taking some profits… thereby causing a temporary decline in this still-intact bull market.

I’m taking SOME profits between now and the inauguration. I’m NOT selling everything and “going to cash.”

I’m merely suggesting that it MIGHT be wise to take SOME profits. AND, if you’re getting ready to buy… be patient and wait for the bottom of the upcoming pause, pullback, or correction.

Again, whether this is only a pause… or significant pullback… or the beginning of a serious correction remains to be seen.

NOTE: I might be wrong! The Dow might actually be “going to the moon” THIS time! 🙂

Outlook For 2017

Politics has once again proven to be a powerful force in the stock market. The United States presidential election on November 8, 2016 was a major event.

A victory by Hillary Clinton was a “sure thing” in the minds of many. Many had positioned their stock portfolios in anticipation of her becoming the next president of the United States.

Donald J. Trump won the election and changed everything for those who were banking upon her winning and had invested accordingly. There was, in fact, a major pullback in stocks (almost a crash) but it was very brief and only occurred in overnight trading in Asia and Europe. There was, of course, some follow-through selling in certain sectors on November 9 and 10th.

However, the rotation out of sectors and companies that would have benefited from a Hillary victory – and into sectors and companies that would now benefit from a Trump victory – began in earnest. As Trump’s campaign promises to reduce taxes and reform government regulation became a realistic possibility, almost all stocks benefited.

The Dow 30 rocketed higher. Gold, silver, and the associated mining companies felt most of the pain as the US dollar, reflecting rising interest rates, also rocketed higher.

Stocks are now due for a pullback.

It’s too soon to say if a pullback in stocks will be minor and brief, or possibly severe and extended over months. I’m inclined to believe that it will be relatively minor if president Trump is successful at pushing through tax relief for citizens and corporations; and reducing government regulations that have been strangling our economy.

The present euphoria resulting from the Trump win should soon subside. We can expect a major push-back against the Trump agenda by the Democrats and their partners in the news media. This, I believe, will raise doubts in the minds of many as to whether or not Trump will succeed in pushing through legislation that will provide tax relief and regulation reform.

I remain bullish on stocks going forward. I believe US stocks, in particular, will see the greatest benefit from a declining bond market.

The trend, I submit, will be upward. Naturally, of course, there will be pullbacks and corrections along the way. Each one of these, however, will be a buying opportunity.

Gold, silver, and the associated mining companies have been clobbered.

Clobbered and down, however on the other hand, it appears that these investment vehicles will be bottoming simultaneous to the topping of the present Trump rally in stocks.

It’s time to go shopping for bargains among the gold and silver mining companies.

As the euphoria from Trump’s victory subsides – in the face of a Democrat push-back against his agenda and the sensational news stories that their partners in the media will provide – we can expect a significant rally in the gold and silver mining companies.

We might very well be seeing the bottom in gold and silver prices right now! This might very well be the beginning of a new long-term bull market for the gold and silver mining companies.

Then again, it seems prudent to view this as a short-term opportunity. We have seen many bear market rallies over the last five years… as the precious metals market trended lower and lower.

It’s time to re-position our portfolios.

By taking SOME profits from our stocks; we will be protecting our gains resulting from the Trump rally in stocks. This will also strengthen our cash position. If there is a significant pullback, we want to have a strong cash position – with which to go shopping for bargains.

By taking new positions in the gold and silver mining companies, we can see some significant gains even if it is only short-term. If this is, in fact, the beginning of a new bull market in gold and silver, we just might see some amazing gains extending into 2018. We’ll see!

Safest Sectors For 2016

peacekeepers_395

The so-called “defensive stocks” should benefit from the present volatility and any significant correction in the broader stock market. As the global economy encounters the proverbial headwinds resulting from deflation and possible war, these sectors are becoming attractive. That doesn’t mean that these will necessarily rise, but they should enjoy support in a falling market.

Aerospace & Defense

I think it’s safe to say that the world is not getting safer. Defense contractors have seen a good year and the growing conflict in the Middle East is increasing demand for stronger militaries around the world.

This sector has been under pressure in recent years due to slowing growth in military spending, however, that spending has been growing and will accelerate as the possibility of war grows.

These are the top contractors that should benefit from growing military budgets: Boeing (BA) – General Dynamics (GD) – Lockheed Martin (LMT) – Northrop Grumman (NOC) – Raytheon (RTN) – and, Textron (TXT).

Stock market beginners may want to spread their risks with an Exchange Traded Fund (ETF) or two. These are the two with the strongest current volume; making them the most liquid:  iShares US Aerospace & Defense ETF (ITA) – and, Invesco Aerospace & Defense (PPA).

Consumer Staples

Consumer Staples companies held up well in 2015 and could see rising stock prices with a slowing global economy in 2016. People don’t stop buying food, drinks, toilet tissue, toothpaste, and soap, etc. even in poorly performing economies. This stability, along with strong dividends, should contribute to stock price performance in this sector.

The largest and most stable in this sector are Clorox (CLX) – Colgate-Palmolive (CL) – Coca-Cola (KO) – Johnson & Johnson (JNJ) – Kraft Heinz (KHC) – Pepsico (PEP) – and, Procter & Gamble (PG).

Stock market beginners may want to spread their risks with an Exchange Traded Fund (ETF) or two. These are the two with the strongest current volume; making them the most liquid:  Consumer Staples Select Sector SPDR (XLP) – and, Consumer Staples AlphaDEX Fund (FXG).

Utilities

Utility stocks fell off sharply in the second half of 2015 and are attractively priced. These are stable investments with strong dividends. The safety lies in the fact that they typically enjoy monopoly status and their products and services are necessities… like Consumer Staples. Also, the utility companies have benefitted tremendously from low interest rates over the last half decade. During an economic slowdown, the utilities see greater demand for their stocks. These could outperform in 2016.

Among the top-rated utilities are: Atmos Energy (ATO) – Consolidated Edison (ED) – Edison International (EIX) – and, WGL Holdings (WGL).

Stock market beginners may want to spread their risks with an Exchange Traded Fund (ETF) or two. These are the two with the strongest current volume; making them the most liquid:  Utilities Sector SPDR (XLU) – and, iShares Global Infrastructure ETF (IGF).

Stocks Will Rise By Default

 

Correction Day

The present gloom and doom among stock investors and traders will run its course. The corrections are necessary. It’s how the stock exchanges function.

The markets bounced back strongly from the 12% correction in the DOW which occurred in August of 2015. It failed, however, to make new highs and finished the year poorly. We have begun 2016 with a pull-back that could result in another correction. We just might retest the August 2015 low.

Veteran stock traders have taken their profits and are waiting for the bottom in this near term downward trend. The bottom will come again. So, too, will a new high. This is normal stuff.

As the Middle East approaches the boiling point, I’m expecting things to get worse for stocks and commodities. Bond prices and the US dollar should go higher.

Looking beyond this, however, the time is coming when the cycle will reverse. Bond prices and the US dollar will top out. Stocks and commodities will find the bottom.

Between now and then, expect more volatility. I am convinced that we will see the bottom in the DOW as well as in precious metals and most other commodities sometime in 2016, perhaps early 2017. That will be the point at which bonds and the US dollar will lose their shine and top out. From this next bottom in the DOW, I expect a wall of money to flow into US stocks – driving it to new all-time highs.

For now, cash and bonds are enjoying the traditional “flight to safety.” The veteran traders are building their cash positions and preparing to go shopping for bargains. Soon, however, the mushrooming debts of governments around the world will compromise the integrity of bonds – and even cash. The wealth of the world will seek alternatives. The alternatives will be high-quality US stocks and commodities.

Of course, there will be ups and downs as stocks and commodities find the bottom and establish a new base. There will be volatility in bonds and currencies as they find the top and reverse.

Again, this is normal stuff, but the volatility should be extreme. Gather your cash. It’s almost time to go shopping for bargains. Stay tuned.

The Trump Stump: The News Media Remains Confounded

donald_trump_smirk

There is a comfortable relationship between the two major political parties and the so-called “mainstream news media.” Together, these three partners have dominated and controlled the political conversation for decades. Those with critical thinking skills – who see that the US is in trouble both culturally and financially – have been marginalized and excluded from the conversation. Skillfully labeling all dissenters as “conspiracy theorists” and “fringe elements,” the news media has provided protection and cover for the political establishment of both parties.

Donald J. Trump’s latest poll numbers reflect that the dissenters are rapidly becoming the majority. The policies of the two major political parties have been exposed as socialistic failures and the “mainstream news media” can no longer dominate and control the conversation.

CNN/ORC poll:                                Trump 39% – Cruz 18% – Rubio 10% (12-23-2015)

Franklin Pierce University poll: Trump 26% – Cruz 12% – Rubio 12% (12-18-2015)

Quinnipiac University poll:         Trump 28% – Cruz 24% – Rubio 12% (12-15-2015)

Keep in mind that the polling numbers above only reflect the opinions of voters identifying themselves as Republican. There is growing evidence that Trump ranks high among independents and conservative Democrats as well. Most of the voters known as “Reagan Democrats” will be voting in November and are expected to identify more closely with Trump than they will with Hillary. Some now say that Trump will enjoy a landslide victory that will match that of Ronald Reagan’s.

So, why do so many people like Trump and ignore the mainstream media’s attempts to marginalize and isolate him?

1) Trump does not back down. Most US voters have been forced to bridle their personal convictions and back down from the onslaught of “political correctness.” Rejecting the very premise of political correctness, Trump openly states what most voters believe – but are afraid to say publicly. Even those who disagree with some of his views genuinely like the way he stands up to the mainstream media and the unelected leadership of both parties.

2) Trump restores confidence. Most US voters have been led to doubt their conclusions and lose confidence in their opinions and views. Certain thoughts and feelings have become forbidden in the US. If you disagree with the latest “party line” or news media “theme,” there must be something wrong with you! This has led to frustration among voters and Trump resonates with those folks. Essentially, Trump supporters can now say; “Hey! I’m not wrong after all! Trump agrees with me!”

3) Trump is willing to acknowledge the proverbial “elephant in the room.” Most US voters are fed up with politicians and news media pundits that sugar-coat reality in an effort to rationalize and justify the socialistic policies that have failed. They see Trump as a problem solver. They see the leadership of both parties and the media as having failed to even recognize and address the problems. Trump’s business background makes him unique among the other choices for President. He has a two-step, executive-style approach: A) Identify and acknowledge the problem; and B) fix it. People are less and less comforted by sugar-coated, politically correct speeches and news reports crafted to make them feel good. The problems are real. People want the problems fixed.

4) Trump is likeable. Dreaming of success is universal and Trump shares his success with everyone. Few will ever enjoy Trump’s financial success, but they can have hope that it is possible when observing Trump. Trump’s success in business is encouraging to those who aspire to be successful. When the leadership of the political parties and the news media attack Trump as an arrogant bragger, they are attacking the hopes and dreams of success held by most voters. Trump is a winner and most folks like him.

The video below is a compilation of Trump statements that have infuriated the liberal media and the leadership of both political parties. Such statements, however, appear to resonate with most Americans and reflect their thoughts.

The leadership of the political parties and the media do not get it… Trump does.