It seems to me that we are at an inflection point in the economy. The government has blown pretty much all of its money and the economic recovery and the economy is still sputtering along. No surprise there.
So what's going to happen? I believe that we'll have another economic downturn which is going to push the dollar to new lows, push gold to new highs, and push the equity markets back down to their March lows.
Yes, I know it's a scary scenario but that's what could potentially happen. We are just looking for one or two more pieces to fall into place and then we could see the unfolding of a very dramatic set of economic conditions here in the United States.
This new video looks at gold, the dollar, and the S&P 500. I believe if you're interested in your economic future you need to watch this video.
As always our videos are free to view and do not require any registration. If you think this is an important video, I strongly suggest you share with your friends and comment about it on our blog.
All the best,
Adam Hewison
President of INO.com
Co-creator of MarketClub.com
Adam,
Thanks for the video. I understand the correlation bewteen a weak dollar and a stronger gold; however, how does a weak dollar result in a weak S&P. Should not a weak dollar give a rise to equities?
Thanks -
Prudent,
Thank you for your feedback. It may already happened but things have a way of changing and decoupling.
As of right now the trend remains on the upside for the S&P and the other indices. Only when we have a signal will we go short these markets.
I hope this helps.
All the best,
Adam
Adam,
In your last gold video you mentioned that we would see a low for gold sometime between Oct 1 and Oct 13th. Do you think we've seen already or might we hit another pull back?
Anthony,
Thank you for your feedback.
The answer is YES. I do believe we have made an important low in gold.
Any pullback to the 1024-1030 I would use as a buy point. I expect the next couple of days to be subdued compared to Monday and Tuesday. Be long for the weekend.
All the best,
Adam
I have the same issue as JT. I have found the triangles of little practical value in trading because I don't know when one will appear either as entry or exit. The email alerts are sent sometimes hours later and often after the market has closed. I suppose I could watch your chart all day constantly but as with one other comment I have often found the data to be lagging real time.
If you could show on the charts where the triangle would appear in the current bar I believe i would be a lifetime subscriber.
George,
Thanks for your feedback. Keep the faith we are working on some major improvements to MarketClub. It is our goal to keep making our service the best of breed.
Try using the 3 day Donchian channel in the technical studies. I think you will find a gem there.
All the best,
Adam
Hi Adam
I was wondering about your rational for the call on a down equity market. The link between the dollar and gold are somewhat obvious. The indications so far on the equity market are opposite to your predictions. If the Q3 earnings reports are better than expected I see the markets pushing up. There are lots of reasons why the markets should pause or pullback but none seem to matter.
Do you still feel that there will be a significant correction in the next 10 weeks? If so do you think we will get to the 200 day SMA.
Rao
Rao,
Thank you for your feedback.
Circumstances have not fallen into place yet for the equity markets to turn down. They are in place for the euro, crude oil, and gold to all trend higher.
If crude oil traded as high as $90 a barrel that will be incredibly damaging to the consumer and the cost of moving goods. I believe the markets will tell us eventually what they want to do.
Right now the trend is positive for the equity markets. We will be watching our Trade Triangles for clues when we want to be on the short side of the market.
I hope this addresses your question.
All the best,
Adam
Hi Adam
Yes, that helps. In terms of entry points: should we use weekly triangles as indicators to get in. If we miss the monthly triangle entry by a week or two how do we make the next entry point.
Also, very nice blog on the 4 ETF investment stratgey. Having been at it for a few years and a full time job I was geting to a similar conclusion (with a lot of scars) over the last few months.
Having the discpline if the challenge!
Bob,
Sorry to hear that you are having a problem with out=r realtime gold quotes. We have had no problems on our end. Give our tech support team a call at 800-538-7424 or 410 -867-2100. They will be able to help you get the matter solved very quickly.
Thanks
Adam
Thanks very much for your speedy reply, Adam. I appreciate your attention to detail. I discovered my problem with the charts...you need to reset the calendar at the top of the screen. For some reason mine was stuck on Oct 2, so nothing after that date was showing on the chart. That seems to be a new feature, so you might consider pointing that out. Might cause problems for other people as well.
Your earlier analysis on the gold market was spot on...very impressive. I missed the big jump but am hoping to get in when the price falls back a bit. Keep up the good work.
I enjoy your insight but today i get an email at 1253 PM telling me that gold is going higher. The dollar and stocks are headed lower.
Gold is at 1040, and the euro at 1.47 two of three happened before you sent the email. Some crystal ball you have there!!
George,
Thank you for your feedback. We have been saying for some time that the gold was headed higher and also that the dollar was going to go lower. I think some of our past videos were very explicit in both price and time as to what was going to happen to these markets.
I'm not sure what e-mail you're referring to. Was that an alert that was sent to you, that you set up?
Let us know.
All the best,
Adam
What about oil? Has it left the station or is the $60.70 target in play?
Shawn,
Thank you for your feedback.
If we go into a highly inflationary environment and I believe we will, I can see oil going higher. If we continue to deflate the dollar, I can see oil going higher.
What I really want to see, is a move over $76. If that happens I think we take a run at $95 a barrel. That would be a 50% retracement of the entire move down from $147.
All the best,
Adam
I have two crucial questions regarding your "trade triangles".
How do you know IN ADVANCE when you should enter (i.e. where the trade triangle will issue a signal)?
The second question, once in the position, how do you use the trade triangles to place your stops IN ADVANCE so at the point the trade triangles issue a sell signal, you are out? (It does little good to see that you should have exited "in hindsight")...
Thanks,
Jim
JT,
Thank you for your feedback.
Stops are always a challenge to the individual trader. You will find this earlier blog we did on stops very useful. Here is the link.
http://club.ino.com/trading/2009/06/how-to-use-money-management-stops-effectively/
All the best,
Adam
Since Monday evening I haven't been able to get any new info on the spot gold chart. It shows being updated on Friday, 2 October. This isn't very helpful, considering the massive moves that have been made the last couple of days in gold. Is there something I'm doing wrong, or is this a software glitch on Marketclub's end? Would appreciate a speedy resolution to the problem.
Adam
Gold is skyrocketing as is the S&P. In an earlier video, you discussed Gold dropping to or near 980 and oil to $60.70 and waiting for that time as a buying opportunity. Has that come and passed with a dropping dollar? Should we get on the Gold and Oil/energy train today or are we again trading in a range? I keep waiting for the S&P to drop by at least 10%, but it keeps bouncing back. Thoughts?
Shawn,
Thank you for your feedback.
Gold has left the station and is headed higher. New all time highs for spot gold is very bullish. Our trade Triangle technology gave a major but today at $1,024.
We are looking for gold to continue higher till the end of the year. Any pullback in the yellow metal will be met with good buying support.
All the best,
Adam
U had said in an earlier video of yours - "the reason why gold has not skyrocketed", that we would expect gold to be down anywhere from the 1st to th 15th, i have not seen signs of this besides when gold dropped to a low of 986 based on fundamentals (non- farm payroll). you can never base a price on a time cyclic action, because at the end of the day it is not the time cycle that suggests price but rather the fundamentals and technicals. As for my above statment being proven true - take a look at the gold price now?
The USA from a international perspective:
The USD devaluation has done uncontrollable damage for anyone willing to hold assets in USD at this point in time. A lower USD will only create inflation in the US (oil, wheat, other imports all to increase) this will eventually increase the price of Gold and the S & P 500 index WILL INCREASE IN INDEX VALUE, (not monetary value) under these conditions based on higher asset valuations in the face of the likely hood of hyper inflation.
As Long as the US keeps their rates on Hold and keeps printing money, the USD will loose creditability as the worlds reserve currency. The USA's greatest asset is it's reputation as a trustworthy country but it ain't playing fair no more.
Russ, Australia (A trust worthy currency)
When the S&P gets hammers the US $ usually gets a whole lot of buyers thinking flight to quality. This in turn hammers commodities, especially gold and other metals. Gold has also followed the S&P for the last 7 months. What catalyst to you think is going to separate these corolations?
BTW As a trader if you have feeling toward anything such a being patriotic to the dollar, you will lose. I repeat, if you have feelings toward something, you will lose all the time. Our job is to make money, without feelings.
The only thing I don't trade is cigarette companies. They should be extinguished from the face of the earth.
As a depression "baby", and in regards to gold, it would be proper to remind t6hat FDR confiscated gold bullion and I think it could happen again.
Jack,
Great comment.
I am not sure how many of this generation know that important fact.
All the best,
Adam
Interesting concepts. If anyone knew about how market is going to behave, probably we should put all our money into it and be on our merry way to retirement, real retirement. One thing i learned is no one really know. Technical folks go with the wind, one day indicators are pointing to hell and after few weeks sky is the limit. Commentators flow where the wind blows. It almost comical drama unfolding every day. Funny part is whole market is watching the same indicators, self full filling prophecy. Whole market is net positions of all these watchers, individual to institutional.
All claims to predict is bogus at best. Just watch any money show, MSNBC, CNBC - Pick your pick. Down market - Bears come and do their dance, UP market BULLS show up with their agenda.
I think stay away from BS, better to stick with your own methods and trade neutral. Manage your risk.
Is someone willing to put their home on the line for market to go to March lows? Probably buy all PUTS then!
Market is totally manipulated by big money. World has changed, see the divergence between DOW volume and VALUE.... Dow went up last 2001 to 2007 but total volume went down.
Its the derivative market and volatility deriving stocks.
There are better strategies that can be learned in Derivative markets to come close to market neutral and direction less trading.
If predictors are willing to put their wealth on the line, i am too! Otherwise avoid creating panic if you cannot control it!!
Sara,
Thanks for your feedback. I entirely agree with you on your comments regarding the media.
This is my favorite part of your comment:
"I think stay away from BS, better to stick with your own methods and trade neutral. Manage your risk."
I agree with everything in this statement except trade neutral. Stay away from the BS (10 out of 10) stick with your own methods in this case Trade Triangles (10 out of 10) Lastly manage your own risk (10 out of 10)
Managing risk is the key to successful trading.
All the best,
Adam
Good thought on CNBC. Most individual traders would be better not watching it. They get burried in an avalanche of opinions, most of them coflicting. Hard to imagine there are people who watch it all day long and try to trade. One would be wiser to limit being influenced by commenteries and develop own trading strategies and style.
James,
Thanks for your feedback.
Try just using the monthly triangles on the GBP/USD they will protect you no matter what happens.
All the best,
Adam
What is about to happen here folks is that stocks will fall to new lows like last year but worse. The dollar will continue to drop and oil will go to 30 early february. gold will climb to 1100-1400 per ounce. the dollar will go to 65 cents. Then next year the us will engage in war with iran and the oil will increase to 75.00. Meanwhile north Korea will hit the east coast with a nukes. Afterwards the sea port will close and oil will hit 150 and gold 2000. us,china and russia will hit korea, iran and two new cureencies will envelop as a result backed by platnium and gold and silver gold will never go below 1000us and oil never below 1000 again. widespread drough will occur and terrible tropical storms will devastate us,japan and chine. Water will become a major commodity. plagues will be used in the wars scretly and wipespread biological diseases will hit. dow will go to 6600 but buy the nears end will reach 10500. dollar will climb back to 80cents and then all commodities will boom people will fear bubbles but will be realised as the true new norms and a huge economic turn around and new highs will be reached in 2011 and a huge recover in 2012. gold will reach 3000us in 2012 oil 150us and 21000 for the dow. Best investments will all over and a new era in new energies,food and drug and healthcare. a population explosion will hit and world wide health care, world hunger and global energy and global security will formulate the next boom will encourage a population explosion and each nation will cancel their debts in proportion to what they owe and gold invetories will be increased.
Thanks for your insight on these areas Adam. I'm interested in your opinion as to the correlation between USD strength/weakness in relation to that of the UK pound.
I have US$s in cash (and earn in US$) but I have a UK mortgage that I want to be able to pay off when interest rates rise (or have the same GBP on deposit). Should I FX USD/GBP now? In stages over time? or buy some sort of option to lock in the rates?
Will your trade triangle system help me with this sort of situation?
Many thanks
Hi Adam,
You mention in the video that you "think" the stimulus money has already been spent in full - from the information I've heard, this is not the case. Apparently, only about 20% of the $700 odd billion of the stimulus has thus far been spent. The rest is slated to be spent in 2010, starting first with infrastructure. If the information I've heard about this is the case, then I'd suspect that this "may" change things for your predictions on the S & P and where it's headed. I'd love to hear your comments on this Adam!
Thank you!
Eve
Eve,
Thanks for your feedback.
It used to be that a billion really meant something in this country. Now we use it to round up errors. Double digit trillions are what we are talking about and that is not going to go away anytime soon. We have been and are printing more money than we can ever pay back.
As always the market will tell us what to do.
All the best.
Adam
The way I see it, corrective phase 2 of the bear market is about over and phase 3 down is imminent. The driving force is credit deflation which will cause all assets, including gold, to fall and create a desperate demand for currency. As most of the contracting credit is in USD, the USD will rise strongly against other currencies. Gold will have its day after the credit contraction has run its course and inflation returns in earnest, but that is likely several years off ith the DJI likely below 100 and silver at 50c.
Adam,
First of all I'd like to thank you for taking the time to do these videos. I agree with you analysis 100%. In recent weeks we have seen correlations starting to do the opposite which I think is a sign of hard times to come. We have seen the S&P go down when the dollar goes down,normally they have an inverse relationship. I also see crude oil heading much higher which will only fuel the fire for the eur/usd to move higher. I am a buyer of euro and gold on dips. Thanks again for your time.
As a baby of the depression, I would be wary of gold bullion ownership as it was confiscated by FDR. Could happen again.
This is a bit off topic but one market that is and will continue to grow is electronic payment processing as shown by mastercard and Visa reports as well as several trade publications regarding this market. From my several trips to Europe over the last several years one thing that has taken over there is tableside bill payment in restaurants using wireless terminals. We will start seeing this trend in the US very soon. One of my favorite investments is small caps in emerging/high growth markets. One such company in this market is Secured Financial Networks SFNL. The market cap is roughly $7M and the float is low ~28M. Q over Q revenue growth has been 50-100% over the last few Qs and I expect that trend to continue higher. This company is worth a look in my opinion.
Thanks for your insights,
Mark
Adam,
Interesting video, as always.
What equities or ETFs or other vehicles do you suggest holding if these trends play out as you foresee them? What is your view of holding physical gold vs. holding stocks of gold producers? Can you refer us to any source of information that might address some of these issues?
Many thanks,
jsaman
Jsaman,
Thank you for your comments on our blog.
I cannot give you any direct recommendations as to where to trade or what instruments you should use, as that would be giving specific advice.
What I can say is this, watch the trends develop with our Trade Triangles and then ride the trend. We just need a few more clues to fall into place and then we should be good to go.
All the best,
Adam
Joe,
Thank you for your feedback. I would not be surprised to see equities trade back and forth for the next week or so. October has been in the past a cruel month for equities. I think the fact that we are so close to the 50% Fib retracement level, and that the market is beginning to become more of a two-way street, indicates that we could be at an inflection point.
During the crash of '29 there were several retracements that were in the 50% range and folks thought that that was the end of the downward move. I am going to subscribe to the theory that it's not over until it's over.
I think it is much too early to say that the recession is over. We've been forecasting, based on historical parameters a low that will come in for the equity markets in Q1 of 2010.
Sooner or later the market action will tell us what it wants to do.
All the best,
Adam
I believe the major difference between present scenario and the one back in the great depression crash is the China factor. In 1929, China was not even on the radar. I believe this unknown factor will play into this market eventually. If nothing else, there will be a great shift in investment from the US to China, if the US markets continue to show lack of staying power. China is just starting to emerge from its century of sleep, and there is still a ways to go before leveling out of their growth.
Nice video as usual Adam, thank you.
The US stock markets are about to enter a primary impulse wave 3 down in EW terms I believe, hold onto your hats.
Deleveraging and safe haven seeking by investors caused the reserve currency to rally cerca 26% last year as the stock markets sank - USD index went from 71 ish to 90 ish. A recent newsletter survey said that 97% of advisors are bearish on the USD.
I'm a big fan of gold and hold bullion for the long term myself but it also got sold off in the deleveraging last year (baby out with the bath water syndrome). I've just recently went long the USD Dec. contract for this reason.
Why should it be different this time?
ATB
Rob
Robin,
See my earlier comments. I would not be surprised to see a mini dollar rally.
Adam
Hi Adam, If your short the dollar wouldn't you be bold in saying that Equities would rally even further past the FIB 50% level. Or do you believe Adam that the trade is over and both Equities and the dollar will slide and the EUR will rise?
Appreciate your feedback Adam
Thanks
Joseph
I'm sure you're right about the S&P, although I think we will ultimately go WELL below the previous bottom. (We will I think have some uptick around the March lows due to speculation and short-covering. That will reverse itself in fairly short order, and we will head further down.)
I don't know about the dollar or gold, but I suspect you will be proven right there as well. After the market drop finds a (short-term) bottom, though, I think many gold-related stocks (like miners) will outperfrom gold.
I always appreciate these articulate and well-reasoned updates from you. Even more, I appreciate that, when you ARE wrong, you admit it quickly (while it can still matter to an investor). That's a very rare quality among market 'gurus' (as it were).
Good video Adam. However I will relate a true story. Last Sept, it was apparent to me that the Stock Market was heading much lower, so I shifted our assets into Gold stocks(as a store of value). Unfortunately there was a mad flight to safe havens US Dollar and Bonds, which caused Gold to crash and we lost $$$...
Therefore I would be careful in shorting the dollar and going long Gold IF the stock market crashes significantly lower. It wouldn't surprise me if we get another "flight to safe havens" such as the Dollar and Bonds. Also, according the latest Commitment of Traders, there is a record short Commercial position in Gold/Silver which has traditionally marked a turn lower.
Just to clarify, due to Bernanke's excessive money printing, I expect massive inflation in the future and thus I am bullish Gold/Silver long term and hold physicals and some metals stocks but am being quite cautious at this "inflection" point.
Jim Rickards has stated that the FED policy is to debase the dollar as the U.S.'s $60 trillion in debts and obligations can't be repaid any other way; the dollar will continue to weaken. Countering that idea is the "flight to quality" response strengthening the dollar one more time should any of the many potential crisis like the Treasury bubble bursting, new wars or derivative market meltdown happen anytime soon. Could you comment?
Bigelow,
I am going to stick with my approach. The market will determine were it wants to go.
Just look at the massive trend the dollar and gold have had over the past eight years. I do not see any political will that is going to change that trend.
Market action is always the winner. Go with the flow in the next six months and I believe you will do very well.
All the best,
Adam
How about the guy that own's oil and natural gas here in this country
do you thank it will hold up in a downturn? Bob.
Clive,
Thank you for your feedback.
Yes, there is a strong correlation between gold and the dollar. Sometimes that correlation is closer than at other times.
Gold tends to be a very emotional in regards to trading. The dollar on the other hand tends to be much steadier in terms of trend and emotion. Most traders tend to ignore trading in the dollar as some say it is unpatriotic to short the dollar. That is a question that every trader must answer for themselves.
As far as contacting the office you can contact support at 1-800-538-7424.
All the best,
Adam
As there is obviously a correlation between gold and the $ would taking both trades - IE long gold and short the $ amount to the same trade? Is there an advantage in taking two trades on this basis?
P.S. How do I contact you if I have other questions or queries as opposed to specifics like this.
Adam,
No, you didn't say the dollar was going straight down. I should've been more clear in my comment and I apologize for rushing with my comment. I just wanted to warn novice traders not to apply long term strategies to short term trades. I'll be sure to explain my thoughts in more detail the next time (it just happens so that sometimes you think your comment is good enough, when you've actually omitted something crucial).
BTW, you up for long dated (30yr) treasury puts? (wink, wink)
Kristjan,
Agreed. I don't believe I said that the dollar was headed straight down. As a matter of fact I would not be surprised to see some sort of short term recovery.
Now to the main trend for the dollar which is clearly down. I expect that we will see the EURO test and possibly hit new highs against the dollar in 2010.
The only straight lines in trading are trend lines.
All the best,
Adam
You've got it terribly wrong on the dollar. The dollar is going to hell in the long term, but meanwhile, it will stage a short to intermediate term recovery. Nothing, I repeat, nothing goes down in a straight line. The dollar is not an exception.
Eventually US$ countertrend move (up) is what will put juice under gold and other precious metals, send the stock & commodity markets (oil, grains, etc., not precious metals)lower, and start the move up in interest rates driving bonds lower finally.
[You’ve got it terribly wrong on the dollar. The dollar is going to hell in the long term, but meanwhile, it will stage a short to intermediate term recovery. Nothing, I repeat, nothing goes down in a straight line. The dollar is not an exception.]
The dollar has already completed it's short to intermediate term recovery. It's ready to make it's next leg down. Adam has it right.
Agreed. I would've expect a much stronger rally for the dollar, though.