Keep Calm - Dec 5, 2016

It looks like things are going to turn out exactly as I said they would. Italy's "No" vote will be the beginning of a euphoria for US stocks. Keep in mind, I said "looks like" not "is" ...

Italy Votes "No" - Dec 12, 2016

Italy indeed voted "No" to the constitutional changes being proposed by the Prime Minister Matteo Renzi. What are the implications?

What Happens in Europe Affects North America

It's true.

What happens in Europe can and will affect North America, just like what happens in North American can and does affect Europe.

During the financial Crisis of 2008, Iceland's three major privately owned banks went bankrupt because of exposure to the US housing market via investment products that had bad subprime loans packaged in with other assets.
https://en.wikipedia.org/wiki/2008%E2%80%932011_Icelandic_financial_crisis

So here's the simple truth ...

Not There Yet - Dec 2, 2016

I am still waiting for the transportation index ....

9199.65

One of the interesting things about Dow's theory of the stock markets is his postulation that current prices reflect all current knowledge. I think, therefore, that it's telling when the Dow has been surging to new all time highs, reflecting an assumed increase in future consumer confidence through increased production and warehouse sales.

But the transportations are stalling.

Dow Theory Development of the Week

With the Dow Jones making new all time highs, we NEED the transportation index to confirm.

Breaking the Silence

So I've been silent for almost two full years. The main reason for this is that the bear market I was expecting failed to show up. The more I examined the charts, the more I realized that on a daily basis, Dow theory no longer works. I believe this is because of the noise High Frequency Trading introduces into the system.

Therefore, I have been forced to take a much longer view of the markets by relying on the weekly closing prices over periods of 5 years or longer. This has significantly drawn out the time that I am holding indexes, but it's paid of nicely.

Right now, both the Dow Jones Industrials and the Dow Transportation index are neither confirming or denying a bear market. It doesn't look good right now with the rammifications of Brexit looming like a hurricaine which might fizzle out quickly or gather intensity ... no one knows! If the hurricane intensifies, it might give us an opportunity to make another once in a lifetime stock purchase sometime in the next year or two. I know ... that's a loonnnnng ways a way. But it pays to have a plan.

So here's the story. In November of 2014, the Transportations made a new all time high along with the Industrials. The industrials went on to make another new all time high in May of 2015, but this move was not confirmed  by the transportations. Ever since then, the stock markets have been a sea saw. Presently, it looks more like an avalanche of cash (roughly $2 trillion worldwide to be more specific) is leaving the stock markets and is heading into Gold and other safe haven assets like cash. This may be setting up a huge temporary run for gold, especially if this very strong intermediate trend continues.

But keep in mind ... the primary trend as of today is still UP. I know. It's insane. It doesn't feel like it should be up, but it is. This may change, and I'll be watching and reporting. The reason I am calling the trend up is that while the transportation index shed 20% a few months ago, this was not confirmed by the industrials. It's like there's a cushion under the industrials preventing them from falling too far.

I believe that cushion is corporate debt and share buybacks. Corporate debt is sky high these days, and companies are using debt to buy shares of themselves, which is padding their balance sheets. It essentially makes them look good on paper when in real life, sales are slowing.

I am therefore be extremely curious to see what happens in this next leg down. If we hit a new low that surpasses the previous couple of lows, I suspect it will be deep and painful, and a perfect opportunity to buy stocks.

The Dollar's Collapse Has Begun, and the Stock Market Keeps Stretching, Stretching, Stretching

By Toby Connor

www.goldscents.blogspot.com

I've been pointing out for several months now that the recent rally in the dollar was a mirage, an illusion generated by the yen, euro, pound, and Canadian dollar all dropping into yearly, or intermediate cycle lows together. This selling pressure in the four major currencies that make up the dollar index spawned what looked like a strong dollar. 

With Bernanke printing 85 billion of them a month, there is no such thing as a "strong dollar". I've been saying for months that once these four currencies completed their bottoming cluster it would be the dollar's turn to crash. The recent collapse in the yen was 23%. The Pound 9%. I think the dollar will be somewhere in between with a loss of 9-12% as it drops down into its yearly cycle low. 

As this process starts to accelerate over the next couple of months the dollar bulls are going to get a rude awakening, as our currency shows its true colors. The acceleration began today as the dollar has now completed a lower low and a lower high.

Once major support is breached at 78.50 there will be nothing to stop, what I think will be a waterfall decline, until the dollar reaches the 73-75 zone. 

And don't forget this is just the beginning. The much larger degree, 3 year cycle low, isn't due until late next year. 

It's time for the unintended consequences of QE infinity to come home to roost.

This should drive either another C-wave in gold. Or as I'm now starting to believe, gold may be in the initial stage of the bubble phase of the bull market. 2015 will be 15 years. That's about a normal during for a secular bull run.

Let's face it, common sense would tell most people that you can't just print 85 billion dollars a month and not have something bad happen. The last time the Fed embarked on this kind of insane policy it was during the real estate bubble implosion. Instead of rescuing the housing market the Fed drove oil to $150 a barrel and spiked food prices around the world, triggering riots and wars in many third world countries.

I expect the same game plan this time is going to reap the same results.

We have all the ingredients in place. Gold has probably completed its yearly cycle low. The COT is showing a max bullish position by commercial traders. Before every bubble phase there is always a devastating correction that convinces everyone that the bull is over. I would say that describes pretty much what has happened over the last 6 months.

And to top it all off the recent manipulation to run the stops below $1523 has triggered massive shortages in the physical market, especially in silver. 

Now add to that a collapsing dollar over the next year and a half and everything is in place for gold to generate at the very least another C-wave advance and in my opinion we probably have the conditions necessary for the bubble phase to begin.

The runaway move in the stock market that we have been watching over the last few months continues to stretch higher and longer. Let me emphasize again, these things always end badly. Usually in some kind of crash, or semi crash.

I strongly advise traders not to chase this move. It's way too late  and risk is extremely high. If you don't time the exit perfectly you risk getting caught in the crash.

The way to correctly trade a runaway move like this, is to wait patiently for the crash to unfold, and then buy long as the Fed doubles down on QE in the attempt to reflate asset prices.

The crash could happen at any time, but based on the intermediate dollar cycle, which is due to bottom in late June or early July, I'm expecting the stock market swoon to correspond with the dollar rallying out of that major bottom. So my best guess is in late June or early July we will see this artificial rally come crumbling down.

Let me emphasize that while I think the crash is going to occur later this summer, there is no guarantee it can't happen sooner.

On a side note: I heard a commercial yesterday in Las Vegas for a seminar on how to get rich flipping houses. Seriously? Are we really stupid enough to go down that road again?

Source 1: http://goldscents.blogspot.com/2013/04/dollar-collapse-has-begun.html

Source 2: http://goldscents.blogspot.com/2013/05/stretching-stretching-stretching.html

S&P Sees Weekly Distribution and NASDAQ Reverses to Support

By Scott Pluschau www.scottpluscahu.blogspot.com S&P 500 sees weekly Distribution Last month I had a post on the S&P showing signs of Distribution in the Candlestick Analysis, which I highlighted in Blue Ovals on the Daily chart right hand side below.  One resembled a "Spinning Top" and the other resembled a "Hanging Man".  The hanging man is similar to a "Hammer" in that is has a large wick below the body of a candle.  However a hammer at the bottom of a trend indicates strong demand.  This type of candle near the top of a trend was a sign that supply was entering the market.  Japanese Candlesticks need confirmation and the following week was a strong week in price negating the prior two candles for the time being. This week there is what I believe to be another bearish candle to keep an eye on.  It resembles a bearish "Engulfing Pattern", however this week's body or opening and closing range, doesn't quite "engulf" the prior body, but it is close.  However this week saw higher highs and a lower close, as well as lower lows.  While volume data comparison is skewed with last week being shortened by one day, this weeks volume was above average. It is another caution flag that there is high risk going long Equities in my opinion. Next week it will be important to see if there is a weekly candle with lower lows and lower highs and a lower close with increasing volume.  Near term the Bulls did a huge service taking back the significant multipoint trendline support that had failed on the Hourly chart.  I will be looking for follow through or a move lower early next week in order to day-trade long or short. The NYSE 52 week highs minus 52 week lows indicator has also been consistently weakening.  A sign "under the hood" that things are not as strong as they may appear in the headline indexes. (Click on chart to expand) NYSE The key reference areas, trendlines, support and resistance levels, and developing patterns are shared each morning in the swing/position trade premium service.  A focus in the updates for the month of May when the next subscription begins will be on Auction Market Theory.  Email for interest. Stocktwits & Twitter @ ScottPluschau Email:  ScottPluschau@gmail.com

Nasdaq 100 reverses back to support. Posted: 06 Apr 2013 05:08 AM PDT In yesterday's post I mentioned the Nasdaq 100 had a potential change in trend coming on the Daily chart, and initially when the trendline broke it was downhill, but the Bulls were dip buying on the open of the day session and didn't stop for the most part pushing the Nasdaq 100 back up to the prior trendline support.  This was a major reversal and you can clearly see a big "wick" or bottoming tail on Friday's price action. What I would want to see next week in order to trade long is if the Equity markets are able to follow through on Monday with this momentum.  Near term the NQ is still trading below the break of a significant multipoint trendline on the Hourly chart.  If early on Monday the market is weak, I will be favoring the short trade setups. (Click on chart to expand) Nasdaq Composite 52 week highs minus 52 week lows indicator went negative in the morning and closed just above zero.  Under the hood things are weakening still. The key reference areas, trendlines, support and resistance levels, and developing patterns in the near term and bigger picture are shared each morning in the swing/position trade premium service.  A secondary focus in the updates for the month of May when the next subscription begins will be an education on Auction Market Theory.  Email for interest. Stocktwits & Twitter @ ScottPluschau Email: ScottPluschau@gmail.com

Survive The Coming Slow-Burn Crash

By Money Morning Editorial
www.moneymorning.com

The money pundits in the press and on TV are gleefully reporting that the blue chips are up over 13,000. They seem to be saying, "Happy days are here again!"

But they're completely wrong.

The seemingly miraculous climb in the Dow - from 6,443.27 after the market crash in 2008... to over 13,000 today- didn't happen all on its own. It has taken trillions of dollars of money from the U.S. Federal Reserve to boost these share prices back near their 2007 highs. 

That means this run of market growth isn't related to real growth. The Dow you're invested in is dangerously inflated. The value of the REAL Dow is much lower than what you see every day. 

In fact...the REAL Dow is at 8,800 right now - and when this market bubble pops, that's where the Dow will go. The real explosion will happen after January 1,2013. That's when the unavoidable "fiscal cliff" of tax hikes and spending cuts will begin to inflict massive damage on the economy.

If you don't protect your investments now, you could see more than half of your money wiped out by the coming financial crisis and resulting market collapse. In a minute I'm going to give you specific and immediate steps you can take to guard your money. But first, let me show you exactly what is happening. 

The Real Value of the Dow

The reason the Dow's real value is a staggering 50% lower than where stocks are now trading stems from intervention by the U.S. government. You see, the U.S. government has intentionally decoupled the stock market from the economy. That is, the connection between the stock market and the U.S. economy has been erased. Obliterated. And that's a problem. A big problem. 

EDITOR'S NOTE: How big a problem is it? A group of prominent economists believes a devastating economic collapse is not only coming... it's a mathematical certainty. The evidence is startling... and undeniable. See it here.

We can pinpoint the precise moment this "decoupling" began - February 23rd, 1995, at the Federal Reserve's bi-annual Monetary Policy Report to Congress. That's when Fed Chairman Alan Greenspan first suggested the loose monetary policy that has stolen the American dream from so many investors. This abrupt reversal of policy spurred an immediate rally in stocks. And overnight, an unthinkable precedent was put into effect.

The Fed's policies could now be used to pump up the market - not strictly as an emergency measure in response to a national crisis, but just because. This opened the floodgates to Quantitative Easing, money printing, interest rate manipulation, and other "stimulus" shenanigans that have become The Fed's MO over the last 17 years. The result: An artificially engineered "Franken-bubble" unlike any in U.S. history.



Remember what happened after 9/11? Greenspan cut interest rates to stimulate the economy, creating the housing bubble. That caused the "crash" of 2008 - which as you can see, was really just the market reverting to its fundamental economic value. However, before the Fed started manipulating the market in February of 1995, the Dow and S&P 500 accurately reflected America's economic growth. 

The following facts plainly show this. 

Why the Dow Should Be at 8,800

Since 1947, U.S. GDP has grown by an average of 3.3% annually, with an average inflation rate of 3.4%. That's a combined 6.7%. At the end of '47, the Dow sat at 177.58. Multiply this by 6.7% - compounded annually through 1994 (47 years) - and you'll get 3,742.

That's almost dead-on the 3,793 reading the Dow posted at the close of 1994. However, since February of 1995, America's average yearly inflation rate has been 2.48%. And the average annual GDP growth has been only 2.38%. That's a combined 4.86%. This means that if the historic relationship between GDP growth, inflation and the stock market had held true after 1994, the Dow would've closed the second quarter of 2012 at 8,808. 

A recent report from the Federal Reserve Bank of New York proves that these calculations are accurate. According to that July 11 report, as much as 50% of the S&P 500's gains since 1994 are due to market reactions to Fed monetary policy announcements. 

What this Means for You

There are two critically important things you need to know if you want to actually make any money in the comatose, Franken-bubble market we're facing.

ONE: The Fed's "market cocaine" is losing its pop - The effectiveness of Quantitative Easing and other stimulus at pumping up equities is diminishing fast.

For instance, QE2 expended 50% more stimulus cash for every point it raised the Dow, compared to QE1. And The Fed's "Operation Twist" is costing even more per market point than did QE2. This latest stimulus attempt from the Fed could do even less. And those who get caught in it could have a big price to pay.

TWO: The economy won't "re-couple" with stocks until 2021 - Eventually, today's hyper-inflated stock market will reconcile with the rock-hard realities of the U.S. economy. It's simple economic physics.

So, let's say that for the foreseeable future, the U.S. economy posts a modest 2% annual growth, and 3% annual inflation. Using the same formula that held true from 1947 until the market's 1995 "decoupling" from the economy, it'll be nine years before the real economic fundamentals catch up to where the market is today! Here's what these two things mean.

For at least nine more years, we can expect a "comatose" stock market - flat overall, with occasional spikes and drops of volatility. And that's only if the U.S. economy grows at 2% annually. Right now, there's very little evidence to suggest that the U.S. economy is capable of growing at a 2% annual rate for the foreseeable future.

Morgan Stanley just revised downward its forecast for America's GDP growth in 2013 - to 1.75%, from this year's 2% growth estimate. MS also issued a warning that because of the unavoidable "fiscal cliff" of tax hikes and spending cuts, the U.S. GDP could get a lot lower after 2013.

But even this gloomy forecast could be extremely optimistic. So the best case scenario: The Dow takes nine years to catch up to its real value, meaning little to no growth in the market. The worst: The Dow collapses to its real value - and takes 50% of your money with it. 

Four Ways to Protect Your Money from the Dangerously Inflated Dow

Now that you know the real value of the Dow, would you trust your savings, your retirement, to this over-inflated market bubble? Here are assets that will let you not only hold on to your money but also turn a profit while the Dow corrects to its real value. 

1: Precious Metals

While QE1 and QE2 clearly did little to strengthen the U.S. economy, their effects on the markets were undeniable.

Commodities soared.

Since March 2009, gold is up 97%, silver is up 162%, and the Continuous Commodity Index (CCI) is up 55%. Thanks to the Fed, this trend has just been rebooted. That means you should maintain exposure to inflation-sensitive assets, like precious metal favorites silver and gold. They will continue to do as well or better than they did during QE1 and QE2. The only difference with this round of QE is that it's going to be much bigger and go on much, much longer. So as a result of the Fed doubling its balance sheet over two years, Bank of America says they expect massive inflation, enough to see gold double as well. They foresee gold to $3,350 an ounce. The outcome is so obvious now even a major bank can see it coming. 

2: Oil

Just like precious metals, oil prices have been on a tear since 2009, up 122%.  While oil's price rise cooled this year, new forecasts show that will not be the case for 2013. Bank of America expects inflation to double oil prices, sending them to $190 a barrel. But there's a lot more to oil's price rise than inflation.

Money Morning oil expert Dr. Kent Moors outlined three key reasons other than inflation that point to higher oil prices in 2013 and beyond: 

• Demand continues to rise in those parts of the world most directly affecting price. Those areas are not North America or Western Europe, but are markets in which unconventional oil will not have an effect for some time.
• Oil production costs are rising. The cost of extracting a barrel of unconventional oil extracted will increase the price of the crude. Energy research experts Bernstein Research said that the average marginalcost of oilaround the world today is $92 a barrel, and is set to rise because it is more expensive to lift, process, refine, and distribute these new sources of crude oil.
• Oil prices are affected by the regionalization of supply for both crude and refined oil products. As we move toward 2015 and beyond, the demand curve will dictate pricing premiums for regions where imbalances of supply are present.

3: Dividends

Dividends represent the biggest source of returns you can get from stock investing. Now, to a lot of people, dividends may not sound very sexy. That's because they don't realize that 90% of the U.S. stock market's returns over the last century have come not from share appreciation, but from the cash that companies pay their shareholders. 



When you think about this, it's like having the thousands of people employed by these dividend-paying companies all working to make you rich. But you can't just go for high yield. As we enter a period of slow economic growth, you have to find companies that not only have a long history of dividend increases, but can survive a U.S. recession. 

That's why Emerson Electric (NYSE:EMR) and Procter and Gamble Co. (NYSE: PG)rank among our favorite dividend stocks. They have more than half of their business overseas. Both have raised their dividends every year since 1957 and 1954, respectively. Emerson yields 3.2% and P&G 3.6%. 

Another top dividend stock is OmegaHealthcareInvestors(NYSE: OHI). OHI is a real estate investment trust (REIT) andthe company's leases have an inflation-protection clause built in, so your nominal yield - in this case 7% - is even better than it looks since the dividends tend to rise with inflation. 

4: Farmland

Legendary Wall Street trader Jim Rogers recently offered this unconventional advice: If you want to get rich, you should be investing in farmland. "It's the farmers, the producers, who are going to be in the captain's seat when the prices go through the roof," he toldThe Australian Financial Review.

Over the last 100 years farmland, based on income and capital appreciation, has consistently delivered positive returns -- with only three brief periods of negative returns (1930s, 1980s, and 2008). And as the saying goes, they just aren't making any more of it. So a severe imbalance is developing in the supply and demand of farmland. Farmland is also an opportunity to invest in an asset class not directly correlated to stocks and bonds, and one with significantly less volatility. Rogers believes investing in farmland is "in its third inning." In other words, there's still plenty of time to get in.

One way is to invest in agricultural futures through ETFs like the PowerShares DB Commodity Index (NYSEArca:DBC). The fund tracks an entire basket of agricultural commodities including corn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs.

There's also Adecoagro S.A. (NYSE:AGRO), a Luxembourg-based company that owns significant farmland holdings in South America. It owns nearly 500,000 acres of farmland, consisting of 23 farms in Argentina, 13 farms in Brazil, and one in Uruguay.

Canadian citizens can invest in Agcapita Farmland Investment Partnership, a farmland private equity fund, with significant holdings in Saskatchewan, Alberta and Manitoba. Jim Rogers is actually an advisor to the fund, currently open to retail investors for a minimum investment of $10,000.

One More Thing You Should Know About...

As you now know, governments and central banks of the world have spent and borrowed us into oblivion by wasting our tax dollars, hard work, and loyal citizenship. And all the money printing by the Fed has occurred while our debt has surged to astronomical levels... Eventually foreign countries are not going to trust that investing in America is a safe bet.

Even worse, our debt is creating an incomprehensible threat that is quickly bearing down on all 313 million Americans. 

To understand the truth about America's economic future, take a look at this gripping investigative documentary. 

You owe it to yourself to learn what else the government is hiding from you.

Source: http://moneymorning.com/2012/11/15/dont-lose-half-your-savings-four-ways-to-survive-the-coming-crash/

This one divergence is reaching "Insanity" level in the S&P 500

By Scott Pluschau
www.scottpluschau.blogspot.com

Over the past twenty five trading days (going back to February 18th, 2013)  in the Emini S&P 500, the index has seen either a red volume bar that was increasing from the prior day's total volume (red representing bearish price) or a green volume bar that was decreasing from the prior day's volume (green representing bullish price action)  a total of twenty times.

20 out of 25 days of price volume divergence as a market pushes to new highs is usually not a healthy foundation for a bull market.   I believe this supply is distribution from "informed money" to the "rampant speculator".  And that is not a pretty picture.

As one of the legends in this business Dave Fry has said many times, they don't put the volume on an investors quarter-end statement.

In the meantime there is also a large volatile rising channel to keep an eye on as there are key reference areas to trade from.

(Click on charts to expand)

Here is a look at the NYSE new 52 week highs minus new 52 week lows indicator.  What is happening underneath the hood so to speak?  In regards to bearish negative divergence, one that is not based on a "sorcery" and formulas, but what is in reality taking place in the stock market, is quite alarming.

I'm looking forward to picking up the quality pieces like the commodities, and producers of the commodities when TSHTF.

Next weekend begins the April issue of the premium subscription based model portfolio services.  Email for interest.

ScottPluschau@gmail.com
Twitter/ScottPluschau

Retail investors are speculating on a new bull market. Should you?

By R. McGuire
www.goldavalanche.blogspot.com

Answer: If you want to risk your money, go for it. As for me, it's too risky of a play at the moment, because we are stupendously close to potentially receiving a tried and tested reliable buy signal.

Here's an overview of what US retail investors have been up to.

• Since 2006, $600 billion piled out of equity funds.
• At the same time, $800 billion flooded bond funds. 
• In the past TWO WEEKS, $35 billion has flowed back into stock funds. $19 billion of these funds are in long-only.

Source: http://www.cnbc.com/id/100416162

Ok, so here's the deal. You and I both know that in order for a new primary bull market trend to be confirmed, the Dow unequivocally must break it's old high. The $35 billion of retail money which has flowed back into stock equity funds is thus nothing short of speculative. This kind of herd move is potentially dangerous. Sure, the herd could be right that a new bull market is upon us, but if the Dow can't break its all time highs while the trans continues to make new highs, all that speculative money that flowed back into stock funds is at serious risk.

This is, incidentally why I am still holding corporate and government bonds, as well as gold and gold equities.
So, I will repeat my words of caution to my fellow retail investors: If you have cash on the sidelines and want to use it, I would be weary of going long on stock funds just yet. At the same time, I also would not short this market. It's essentially a no man's land at the moment. If you are itchy to put your cash to work someplace, please do it cautiously. Better to miss 5% of a bull market that will surge 50%, than to get in at near the top of a bear market that will slide 20%. At this point, the Dow only needs to go roughly 150 points higher to beat it's all time high. Waiting for that moment now is not only wise, but prudent. As long-term investors, our timing doesn't have to be perfect, but we do not want to get stuck on the wrong side of the primary trend.

In fact, I might even wait for the Dow to double confirm a breaking of its old high before buying into more equity funds.

Happy (and patient!) Investing,
R

Equities Update: Wednesday, October 10th 2012

Remember back when I said we would likely see 13,000 again on the Dow? Well, this may be that time. Even if we don't see 13,000 directly, there is likely to be a lot of volatility in individual stocks as we proceed through earnings season. This should translate into some great buying opportunities.

Keep your stink bids in.

Right now, the Dow Trans has refused to break support at 4,847 (on the daily charts) or 4873 on the weekly charts. Because this ain't happening, I suspect that insiders have some clue that profits are on the way. We'll see. If the Trans holds support going forward, watch for the correction in the Dow to be muted as well. If the Trans breaks support, there's a good chance the Dow will take a harder correction. It doesn't matter why, it just matters that it will happen one way or the other eventually.

The one thing that can turn the markets around is the Fed announcing this month's bond purchases. Although, this may simply fuel the irrational bond market bull. You know the old saying ... the markets can stay irrational longer than you can stay liquid. So through all of this, don't fight the Fed by making contrarian bets just yet. That time will come, but that time is not yet. In fact, it may be time to buy a bond or two if you rely on income. Also, dividend paying stocks are the most likely to a) not correct as hard and b) follow counter trends during market weakness. Keep that in mind as well, but don't go chasing waterfalls here folks.

Equities Update 08/08/2012: A Hearty Intermediate Sell-off Is Now 'Baked In The Cake'

Are you ready for the next major intermediate decline in stocks? It will happen, and it may be sharp, but it will not be the end of days that everyone will think. Pay no attention to the people claiming "sell! This is the end!" ... it isn't ... at least not yet. The Dow has been dragging the transports around kicking and screaming, and even though the transports remain in negative territory, they will eventually play catch-up.

In fact, those shrewd investors who are able to pick up shares of great companies that go on sale during the next sell-off will do very well for themselves heading into the fall.

I expect the major indexes in the US to follow the next leg down. I think it will make a fantastic time to start nibbling on tech stocks again, as well as for a tranche of our Gold Producer ETF holding, GDX or the RBC global precious metals mutual fund (for Canadians only). I think that many stocks will be subject to the current trend of volatility, especially those who have posted weaker earnings and/or lowered future estimates. It's just the way the wall street cookie crumbles ... but the time-tested method of analyzing the markets that we employ will enable us to be positioned ahead of the crowd.

When the next decline happens (it must happen at this point ... and sooner than later), don't be afraid ... be happy! Scoop up shares of companies you've been analyzing and watching when they become oversold (an RSI reading of less than 20), or even better, when/if both the RSI and the William's %R read oversold on your prospect's weekly chart.

And take some time to rest while you wait.
I know I will be



R

The Eurozone Bailout: Prepare for What's Next

June 15th, 2012
By Kieth Fitzgerald
www.moneymorning.com

"At this stage in the game, the thing you don't want to do is bail out. What you do want to do is make sure you have your protective stops in place, get your pencils ready because there's a possibility that many good companies are going to get put on sale, and history shows that you buy into massive sell-offs, not run the other way." - Keith Fitzgerald

Q: What will happen in Europe?

Greece chickens out. The G20 has its hands out and wants to have Germany's standard of living. Germany should leave the EU and preserve its economy. There is no reason it should sacrifice itself to pay for the malfeasance and incompetence of everybody else.

Politicians will kick the can down the road while hoping rumors of future action will carry the day.

To load the video, please visit moneymorning.com

Q: Will we get a bailout?

Will we get a bailout? - I think it's a foregone conclusion. The only question is whether or not we go through the front door or the back door.

I believe the Federal Reserve will get involved ultimately to bailout the European banking system, which will grind to a halt. This has significant ramifications at the very highest political levels in Europe and the United States, especially with the U.S. heading into elections and approaching a repeat of the debt debates.

Q: Would I own stocks going into this weekend when so much is on the line?

Yes. No question about it. At this stage of the game, bailing out is the wrong thing to do. Many good companies will get put on sale and history shows that you want to buy into chaos rather than run the other way.

Q: Finally, what will this global chaos do to gold prices?

I expect gold prices to drop initially, perhaps even sharply, as trading houses raise cash. But the moment a bailout is announced, watch gold head the other way. The only question at this point is the order: drop first, bailout later or bailout first, correct, and rise later.

Ultimately gold will resume its place at the head of the class. I still expect $2,000 an ounce or higher within the next 12 months.


Related Articles and News:

• Money Morning:
  5 Ways to Avoid the “Spailout” and Sleep Soundly at Night
• Money Morning: Three Reasons Why the U.S. Dollar is Really Rising
• Money Morning:
  Everything You Need to Know About Gold Prices
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  Why the Spain Bailout Package Won't Work

About the Author
Keith Fitz-Gerald has been the Money Morning team Chief Investment Strategist since 2008. He’s a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to being editor of the Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and the Strike Force service, which aims to get in, target gains, and get out clean. Learn more about Keith on our contributors page.

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Source: The Eurozone Bailout: Prepare for What's Next: