Nice moves the past 2 of 3 days.
Would you open another position at this level, or wait for a pullback? I suppose if it goes parabolic then there’s not much sense waiting for a pullback.
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Silver usually makes stronger moves towards the end of the week compared to the beginning, so we may see it pick up steam and accelerate in the coming days.
Just to clarify, I don’t have a crystal ball. 
I just know from studying historical trends that gold and silver will eventually go parabolic (not in a smooth ascending path) but I don’t know when so I have to be on the look out for signs. It seems we’re getting the first signs now but there’s no guarantee, we just have to watch and see how it develops.
Personally I wouldn’t open another position at this level especially if it starts to go parabolic. IMO, the safest places to add were on the dips / pullbacks in the chart below, see the blue arrows highlighting where I preferred to enter buys.
We’ll be entering unchartered waters once it goes parabolic because Muni bonds look like they’re going to implode and junk bonds not too far behind. There are also a number of European banks that are looking very vulnerable and may become the epicenter of a new banking crisis. Again I don’t know when it will happen nor in which order but when one of these goes, it will send a seismic shockwave across the global financial system.
This shockwave will ignite the afterburners in gold and silver but not before causing major volatility (in both directions I believe) from an unpredictable cascade of margin calls in risk on markets, the ride is going to be wild and violent. Again, I don’t know when it will happen, just that it will. So any positions opened during the parabolic phase risk getting whipsawed in the volatility before it eventually goes vertical.
What I highlighted above may take months to unfold. For now I’m looking at the $50-$60 area towards the end of Q4 before a meaningful pullback. I don’t expect it to be a smooth ride that will give much opportunity to safely add to the position but let’s watch and see how it evolves.
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I understand your point, but geopolitical news does affect the market in some sense. That’s the actual point. I am not saying only US election can alter the market, but it definitely can affect.
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I totally get what you’re saying and agree when it comes to unpredictable geopolitical events like natural disasters, earthquakes, tsunamis etc. The Fukushima nuclear power plant disaster is a perfect example, it was impossible to foresee and I agree with you that these definitely have an impact.
But if we take what the charts are showing us right now, we can already predict there will be revolutions, military coups, increased geopolitical tensions between countries and even wars in the future. But we can’t say when these things will happen or which countries / parties will be involved, just that the probabilities of these happening are very high because they’ve happened in the past under similar conditions. These things will have much greater impacts on the short term charts / time horizons but in the largest timeframes / longer time horizons these things will confirm what the longer trends had already priced in.
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I totally get your point. Ultimately the election is a factor(small or big) which can be considered when it comes to trading, specifically intraday.
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Absolutely, 100% agree. 
The shorter the trading horizon, the greater the impact of the election (or indeed any other geopolitical event) and the more a trader must take these things into consideration. 
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I very much agree, avoiding getting hit by a sudden price reversal due to a world event can be largely avoided by being on the right side of the trend. Most geo-political news does not emerge from a vacuum, and the markets pay attention to these things night and day, which we just can’t do. The result is they telegraph their analysis to us by moving price up or down. When was the last time that a country with a booming economy and sky-rocketing currency suffered a coup?
One other thing for traders to be aware of, almost no geo-political news emerging over weekends is good. Weekend news events are unplanned, nobody in power plans to release their latest good news story on a Saturday afternoon, so most weekend news is bad.
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What do muni bonds have to do with gold & silver?
Welcome to another episode of Dollar McGavin’s mental madness. If my last update didn’t drive you off the deep end, this one will surely send you to the loony bin. 
(Apologies for the dark humor, but I need it to keep me sane from the disaster I see coming)
Here is a weekly chart of the MUB muni bonds ETF. Muni bonds tried to recover from the COVID lows when the Fed bought them outright to support municipalities. Since the Fed stopped buying and inflation kicked in from the 1st leg of the commodities bull run, muni bonds have deteriorated. Junk bonds are not far behind.
Bonds are used as collateral for interbank transactions and loans, they make up a large portion of the foundation for the global banking network. To a bank, when the value of a collateralized asset can no longer cover its transaction liability, it is the equivalent of a margin call in trading.
The chart suggests that we are headed towards darker times. The latest rally was supposed to be a recovery rally which ended in a double top and now looks to be rolling over. The funny little labels in the charts is actually a proprietary indicator that measures and collects the price swing data in time and magnitude. The rectangle area is a statistical extrapolation (70% probability) of where the current down swing is expected to bottom, blue shaded area if it was a bullish pullback or red shaded area if its a bearish impulse wave. The current downswing is targeting the red shaded area.
In other words, if this market continues to behave (price swings) as it has always done, there is a 70% chance that the current price swing bottoms in that red shaded rectangle, the same levels that led to Fed interventions and bank collapses in previous years. BTW, some banks never recovered from the GFC and others look extremely vulnerable.
And whenever the money unit (currency) and banks are called into doubt, there is an exodus into gold & silver. IMO, the institutions and the big players have already sensed this and it’s reflected not only in the current gold & silver bull run, but can be seen in the global risk on markets, such as equity indices, financial sector and banks stocks showing signs of topping and rolling over.
BTW, it would give me no pleasure or ego boost to be proven right because the 2nd and 3rd order effects will be horrible and a lot of people around the world will be much worse off. Personal feelings and emotions aside, I just go where the charts analysis takes me.
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yeah! it was a great discussion with you.
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Palladium and platinum, the other half of the precious metals complex, look like they’ve hammered in mega bottoms and are breaking out to join gold & silver.
Weekly chart of palladium:
This is a monthly chart of platinum, after a decade long bear market, IMO, this is the 2nd cheapest asset (behind silver) on the planet. The yellow moving average has a length of 60 months (5 years) and is turning higher indicating bullish long term momentum. At this scale, these things turn slowly, but once they get going they’re unstoppable for years.
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This thread is turning into a journal, which wasn’t my intention. I’ll keep updating until we see either a strong move down in risk assets and/or a strong move up in commodities.
On Friday, silver made a weekly close inside the parallel channel so no parabolic move yet. We know its coming as it does in every precious metals bull market, we just don’t know when. Right now it looks like it’s catching its breath to make another try this week, let’s see what happens.
In the meantime, the US Dollar index is the most important chart to watch in my opinion. It is the lynchpin to virtually all other markets. This is a monthly chart going back to 2009, the Global Financial Crisis and the beginning of the ZIRP environment.
The USD strengthening since 2009 has drawn a lot of foreign capital into US assets: equities, bonds, real estate and more. This has resulted (together with other factors such as ZIRP) in the biggest and longest equities bull market in US history.
Once nominal gains in US assets no longer offset the USD depreciation vs other currencies + hedging costs, look for foreign capital to make for the exit. Roughly 30% of the market cap in US equities is held by foreign investors. Essentially a rollover in the USD means a rollover in US assets as well as global risk assets. This can be seen in the stagnation of global equities indices around the world: Sensex, Nikkei, STOXX600, EU50, FTSE100, DAX, HSI, KOSPI and more.
I expect the USD/DXY to head down to the 2009 lows, possibly even lower. Why? Because the US has the most debt to deleverage and the USD will be the release valve. The math says, negative real rates are in the cards = inflation will run very hot. The markets now look to be pricing in a stagflationary environment = financial/risk assets down + hard assets (commodities) up.
The prime beneficiary will be commodities, energy and precious metals, which have already initiated their respect secular bull trends. While the USD / DXY looks to be breaking down into a secular decline, the Bloomberg Commodity Index looks to be on the verge of breaking out into the next leg higher:
Let’s watch and see how things unfold.
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One more thing to add here is that even though the markets are waiting on the US election, the secular trends have already started. The charts have already signaled what’s to come:
- gold bottomed in 2015
- commodities bottomed in 2020
- the US Dollar index topped in 2022
- non-US global equities looked to have topped earlier this year
- US equities on the verge of topping and rolling over now
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European banks and the vulnerable financial sector
Many banks never completely recovered following the global financial crisis. Considering that we’ve had a global ZIRP environment which devalued most major currencies, this alone should have been enough to lift stock prices. But for many financial institutions, this isn’t the case.
The interesting thing with banks is that most people’s understanding of how banks work today is terribly outdated. Banks have virtually free reign to create as much “money” out of thin air as they like and a license to expand their balance sheets at will, the only thing that limits them are their own risk models & management. The global banking industry thus can be seen as a very complex daisy chain or network of liabilities between each other. This daisy chain network is so complex and so opaque that there is no way for any bank much less regulators to calculate the sheer scale of liabilities and true risk to the entire global banking system.
Simple example: Bank A creates “money” (assets to add to their balance sheet) out of thin air to lend to bank B which does the same with bank C, which does the same to bank D, which does the same to bank A + bank B + bank E and bank F. All of these banks of course do commercial and retail business as well, but they only know the risks to their own balance sheets, they have no idea what risks other banks are carrying or what the total risk in the global banking network looks like.
So when one of the banks gets into trouble for whatever bad / risky deals they made and is unable to meet its liabilities to the others, that’s when we see contagion spread very very quickly to virtually all banks around the world.
Here are 4 vulnerable banks that may be the epicenter of the next banking crisis. The following are linear monthly charts going back to 2009 of major European banks that never recovered post GFC.
French bank Société Générale:
Spanish Banco Bilbao:
German Commerzbank:
And the German behemoth Deutsche Bank
There are several Japanese (remember the JPY carry trade unwind?) and American banks & financial institutions as well but I’ll leave it here for now.
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Happy Sunday morning everyone!
Just thought I’d add an update from my normal weekend analysis.
I find it fascinating how price charts can sometimes read like a novel. And these tell an interesting tale. First look at the Bloomberg commodities and Muni bond charts posted earlier in the thread. Then take a look at junk bonds below. Junk bonds are a proxy for corporate credit risk. A healthy corporate credit market is the backbone of a healthy growing economy.
Rising commodity prices drive inflation and inflation is bond market kryptonite. This is clearly illustrated when you look at commodities and bonds side by side. Now as commodities look like they’re headed into a 2nd leg higher, muni and junk bonds look like they are headed much lower. This will drive up financing costs for businesses, which is not good for equities nor the broader economy. And just like Muni bonds, junk bonds are not far above their COVID lows and if this market continues to behave as it always has, there is a 70% chance that the current wave down will bottom in the red shaded area, well below previous crisis levels.
This looks to be impacting risk markets, let’s start with the poster child for the current AI boom: Semiconductors. They seem to be in the process of forming a head & shoulders pattern that is falling out of the longer term uptrend channel going back to Oct 2022. Price will need to make a quick move through and hold the red moving average to avoid completing the H&S formation which is targeting the $130 level, ~40% drop from the current price.
It also looks to be impacting the broader US equities markets. First the S&P500, where price has fallen out of a shorter term uptrend channel, which looks to be cascading into falling out of a longer term uptrend channel:
And then the Nasdaq100, which tends to lead the S&P500 has so far failed to get back in and stay inside its longer term uptrend channel. It now looks like it’s leading the downside.
This is global as can be seen in European and UK equities. Unlike US equities where the strong USD (DXY) attracted a lot of foreign capital, the European and UK markets traded mostly sideways since Q2. The Euro Stoxx 50 seems to have run out of upward momentum and has decisively broken out of the intermediate term uptrend channel and down through its 10, 50 and 200 daily moving averages that have clustered together, suggesting longer term decline.
The UK FTSE100 has been trading sideways since hitting ATHs in May, suggesting distribution phase and has fallen out of its intermediate term upward channel going back to Aug 2023.
And the same for the Japanese Nikkei, where price has fallen out of its longer term upward channel going back to 2022, suggesting the JPY carry trade unwind may have just been a prelude to what’s coming.
While US elections will have some short term impact on the markets, these tectonic plates have been in motion for quite some time. The next few weeks and months will be volatile enough to blow up hedge funds, pension funds, the global banking sector as well as margin calls in risk assets. Precious metals and commodities will be the main beneficiaries, but may initially go down with the other markets as margin calls may force liquidation to cover losses elsewhere.
No one has a crystal ball to foresee how or in which order things will unfold but the overall direction is quite clear, in my opinion.
Let’s watch and see how the next few weeks play out.
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When there are strong market movements, I always find it helpful to zoom out and look at the bigger picture. While all eyes were on the jump in the US equities markets post election results, the more interesting part is what wasn’t talked about. For example the Fed has started a rate cutting cycle, what happened during the 2 previous bull markets when the Fed started cutting rates? The charts speak for themselves:
Also looking under the surface, which sectors benefitted the most last week? It certainly wasn’t the semiconductors and technology, the 2 leading sectors of the 15-year long bull market. Sure they went up but neither made new ATH highs to match the equity indices and the SOXX ETF has a ways to go before negating the H&S formation:
Surprisingly, the sectors that shot up the most was finance (+6%) and banking (+12%). Really? Are these really going to be the new driving force to lead the US economy higher? Has commercial real estate and bonds (major foundational pillars) made a miraculous recovery? The bond charts posted in earlier replies and this real estate ETF look more like they’ve started intermediate term declines:
A rising tide lifts all boats, so if the financial and banking sectors are the rising tide, then someone forgot to tell Citigroup (down 85% since 2006) and AIG (down ~95% since 2007), which both haven’t had much of a recovery even after 15 years.
What’s really interesting is while US indices went to new ATHs, nearly every other equity index looks to be breaking down, here’s one example:
Also of note is that while US banks gapped up nearly 12%, European banks tried to spike up higher but then were driven down, as was the case for major French bank BNP Paribas:
Are we in the midst of a new renaissance period in US banking and finance or could this be market makers sensing upcoming volatility trying to suck in HFT algos and short term momentum capital in order to re-position their books?
Gold and silver also had a pullback that looks to be finding short term support. Question is whether this is a short term pullback or an intermediate term one, odds are it’s the former but we won’t know for sure until we get more clues.
Should be a very interesting week ahead.
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This is an interesting take! Spotting shifts in speculative capital can indeed be powerful for identifying trends. Silver, with its relative underappreciation compared to AI-driven sectors, could be primed for a move, especially with macro factors like inflation and global debt. It’ll be fascinating to see how this plays out!
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Happy Monday morning, everyone!
Let’s jump right into the latest action in the Nasdaq 100 with a daily chart, where it looks like a trap was sprung on the bulls into a marginal ATH:
On a weekly chart of the SOXX Semiconductors ETF, price failed to hold the red moving average (see previous SOXX update) and made a decisive move down to continue driving an intermediate term H&S pattern formation:
I posted a Microsoft chart and comments in another thread:
In addition to MSFT, this daily chart of Apple shows a marginal ATH / double top with the action now below the yellow intermediate term SMA and not too far above a vital support area:
In addition to semiconductors, healthcare has been one of the better performing sectors during this long term bull, but looks now to have a made a strong move down decisively shifting the short, intermediate and long term momentum downwards:
In previous updates, I brought up banks. The chart below shows the high correlation between the real estate sector and regional banks:
And if we take a closer look at the action in real estate, we can imagine what it will mean for regional banks:
Going abroad to Japan, please see the Nikkei big picture weekly chart in an earlier update which shows a potential H&S pattern formation. In this daily chart below, we’ll take a closer look at the “right shoulder” currently in formation, which seems to have made a lower high. The red SMA turning down and a break through the yellow SMA and dashed support floor will give a final confirmation:
The Indian Sensex has been the 2nd best performing stock index behind the Nasdaq 100. No doubt that it is in bubble territory. We see not only a lower low but also the intermediate term yellow SMA turn down confirming that the recent ATH was the intermediate cycle high. With most global central banks now in rate cutting cycles, this strongly suggests that it was the bubble blow off top for this long term bull.
Right now, there are so many areas that have either already started or are on the verge of breaking down that any one of them could start a chain reaction across risk assets. Again, it’s impossible to say in which order it will happen, but it’s also impossible to ignore the dominoes lining up near the edge.
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Buy ethereum and Bitcoin 